El Dorado County supervisors draft cannabis tax rates
MEYERS, Calif. — Cannabis’ role in filling public coffers became clearer at a recent El Dorado County Board of Supervisors meeting with the board voting to approve cannabis tax rates for the unincorporated areas of the county.
All together the board decided to tax retail at 4% of gross receipts, outdoor cultivation $2 per square foot, mixed-light cultivation $4 per square foot, indoor cultivation $7 per square foot, manufacturing 2.5% of gross receipts, distributor transport 2% of gross receipts, testing at .5% of gross receipts and nurseries at 4% of gross receipts.
Supervisors decided not to deviate from the cannabis tax recommendations the county’s ad hoc cannabis committee put forth. Besides lower than usual distributor and testing lab tax rates, county staff tried not to deviate too far from the median tax rates set forth by the 21 other California counties with a cannabis tax measure, according to Creighton Avila, deputy chief administrative officer for the county.
Still, some say the rates are too high.
Rod Miller, head of the El Dorado County Cannabis Growers Alliance, said he’d like rates similar to Humboldt County’s notoriously low cannabis tax rates.
“(El Dorado County) is going to be competing with other counties and states over price and quality very soon,” Miller said. “These tax rates are on all parts of the supply chain. It ends up accumulating as an anti-El Dorado County tax. Potentially, out-of-county cannabis will be cheaper than our own county product.”
Specifically, Miller said the mixed light and outdoor cultivation rates were too high, recommending a tax of $1 and $2 per square foot, respectively.
Claire Simpson, a cannabis licensing consultant, said the board should consider the impact of high taxes on lawful cannabis business owners and the black market.
“The more heavily we tax cannabis, the more heavily the black market runs,” Simpson said. “We’re seeing this all over California … If our cannabis businesses can’t be profitable then we’re not going to get the tax revenue we need to fight the black market anyway.”
Miller, Simpson and other low cannabis tax advocates found some sympathy on the board.
District 1 Supervisor John Hidahl and District 5 Supervisor Sue Novasel both expressed interest in lower cannabis tax rates; however, the board ultimately deferred to the cannabis policy expertise of Avila and Deputy County Counsel Breann Moebius.
The tax rates were set within the range enacted by El Dorado County voters through Measure N in 2018. Measure N covered commercial cannabis permitting, taxing and enforcement. Revenue sources include fines, fees and taxes.
“If we feel that cannabis taxes are too high, we can lower them in the future,” said District 3 Supervisor Brian Veerkamp. “It’s much harder to raise taxes if they’re too low.”
The state imposes a 15% excise tax on retail cannabis sales and cultivation taxes of $9.25 per ounce on cannabis flowers and $2.75 per ounce on cannabis leaves. There are no sales or use taxes on medical cannabis for patients with a medical identification card.
State cannabis tax proceeds are placed in the Marijuana Tax Fund. The fund covers the cost of administration and provides funding to youth-related use, environment-related purposes, local governments and the California Highway Patrol.
At the meeting, several cannabis industry activists also spoke in favor of reducing outdoor and mixed-light commercial cannabis cultivation setback regulations.
Richard Miller of A Therapeutic Alternative operates an indoor, retail dispensary within feet of churches and schools. Overregulation of where indoor cannabis facilities can operate is overburdening the industry, he said.
“In these (indoor) cannabis facilities, you can’t walk in the door without your license,” Miller said. “If you’re under 25, the security guard is going to check you at the front door. There is no reason for a child or anyone under 21 to even begin walking into the building or even see, smell or understand what’s going on inside.”
The board was reluctant to take any action on commercial cannabis setback regulations. Veerkamp and District 2 Supervisor Lori Parlin were outspoken in their opposition to amending current setback regulations, with the former advising the rest of the board to “keep the smell in mind.”
Avila cautioned the board that they may be breaching some trust from voters by amending 2016 cannabis measures and easing setback regulations. “Just because you voted for a proposition, doesn’t mean you want to smell it,” he said.
Outdoor and mixed-light commercial cannabis cultivation requires at least 10 acres of land with a zoning of rural or agricultural.
In 2016 commercial and recreational cannabis use was legalized in California with the passage of Proposition 64. The ballot measure preserves local control over commercial cannabis activities giving local governments and/or citizens the right to decide on commercial cannabis activities.
Recreational cannabis is legal or soon-to-be legal in 11 states. Its possession, use, cultivation and distribution remains illegal under federal law. As a result, state or local permitting doesn’t protect a person from federal prosecution.
After the passage of Prop. 64, the El Dorado County Board of Supervisors placed a temporary ban on commercial licenses for both medical and recreational use cannabis through Dec. 12, with an exception for existing medical use dispensaries.
Currently, no commercial cannabis businesses are operating in El Dorado County.
On Tuesday, Sept. 10, the board will hold a public hearing on proposed commercial cannabis fees for the unincorporated areas of the county and is expected to take final action on amendments put forth by the planning commission to several cannabis measures approved by voters in 2016.
The amendments include striking the distinction between recreational and medicinal cannabis use by combining them into one ordinance while still licensing them separately, creating a commercial cannabis section of the county’s zoning code and other minor changes related to changes in state cannabis law.