Agenda packet — California City City Council, October 28, 2024

OCTOBER 28, 2024

AGENDA

CITY OF CALIFORNIA CITY

CITY COUNCIL/ HOUSING AUTHORITY/ SUCCESSOR AGENCY

SPECIAL CLOSED SESSION MEETING
MONDAY OCTOBER 28, 2024
SPECIAL MEETING @ 1:00 PM

COUNCIL CHAMBERS & VIA ZOOM
21000 HACIENDA BLVD., CALIFORNIA CITY, CA 93505
If you need special assistance to participate in this meeting, contact the City Clerk at (760) 373-7140 or via email at [email protected]. We request a 24-hour notification prior to the meeting in order for the City to make reasonable arrangements to ensure accessibility. (28 CFR 35.102-35.104 American Disabilities Act Title II)
Zoom instructions and notes:

Web Link: https://us06web.zoom.us/j/83365356081
Meeting ID: 952 3385 8330

1.Public can dial into the Zoom line:

Kelly Kulikoff
MAYOR
Ronald Smith

MAYOR PRO TEM
Jim Creighton
LaShelle Cooper
Michael Kulikoff

COUNCIL MEMBERS
__________________
Latisha Lamberth

ACTING CITY MANAGER
OCTOBER 28, 2024
a.One tap mobile: +16694449171,87254527178# US
b.Dial the following number: +1 564 217 2000 US

2.Comments
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Public is urged to listen to the meeting in a quiet place, to avoid background noise. We also request public to MUTE your audio device when not commenting to avoid disruption during meeting. ** At this time, please take a moment to turn off your cell phones ** 1:00 PM SPECIAL MEETING

CALL TO ORDER

ROLL CALL
Councilmembers: Cooper, Creighton, Kulikoff, Mayor Pro Tem Smith & Mayor Kulikoff

APPROVAL OF AGENDA

APPEAL HEARING
PH1. Public Hearing to Consider Herbs Cali Krush, LLC’s Appeal of a Notice of Violation Concerning Cannabis
Business Tax Payment.
a. Open Public Hearing
b. Staff Report: Joaquin Vazquez, Special Outside Counsel (Hensley Law Group) c. Public Comment
d. Close Public Hearing
e. Discussion
f. Recommended Action: 1)Conduct a public hearing to consider Herb Cali Krush, LLC’s (“Appellant”) appeal of a notice of violation concerning cannabis business tax payment, pursuant to California City Municipal Code (“CCMC”) Title 3 (Finance), Chapter 2 (Revenue), Article 8 (Cannabis Business Tax).2)Determine, by minute order, whether to uphold, modify, or reject the California City (“City”) Tax Administrator’s imposition of cannabis business tax upon and associated issuance of notice of violation to Appellant, as set forth in the June 10, 2024 notice of violation.3)Direct special counsel to memorialize the City Council’s determination and supporting findings in a resolution for the City Council’s consideration and approval at a future City Council meeting.4)Alternatively, discuss and take other action related to this item.

OCTOBER 28, 2024
COUNCILMEMBER COMMENTS, AGENDA REQUESTS, AND AB1234 REPORTS This portion of the meeting is reserved for council members to present information, announcements, and items that have come to their attention. The Brown Act precludes Council, staff, or public discussion. Short staff responses are appropriate. The Council will take no formal action. A Council member may request the City Clerk to calendar an item for consideration at a future meeting or refer an item to staff.

ADJOURNMENT

AFFIDAVIT OF POSTING
I, Leanndrea Weible, Deputy City Clerk for the City of California City, California, DO HEREBY CERTIFY under penalty of perjury under the laws of the State of California, that the foregoing notice was posted at the City of California City, City Hall bulletin and all other official bulletin boards and the City’s website at least 24 hours prior to the special meeting in compliance with the provisions of the Brown Act. board at 21000 Hacienda Boulevard, California City, CA and on all official City bulletin boards.

Dated: October 26, 2024
Leanndrea Weible, Deputy City Clerk
ATTACHMENT 1
CCMC Title 3 (Finance), Chapter 2 (Revenue), Article 8
(Cannabis Business Tax)
- Code of Ordinances
TITLE 3 - FINANCE
CHAPTER 2. - REVENUE
ARTICLE 8. CANNABIS BUSINESS TAX
California City, California, Code of Ordinances Created: 2022-05-13 14:23:07 [EST] (Supp. No. 10)

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ARTICLE 8. CANNABIS BUSINESS TAX
Sec. 3-2.8.010. Title.

This article shall be known as the Cannabis Business Tax. ( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.020. Authority and Purpose.

The purpose of this article is to adopt a tax, for revenue purposes, pursuant to Sections 37101 and 37100.5 of the California Government Code, upon Cannabis Businesses that engage in business in the City. The Cannabis Business Tax is levied based upon business gross receipts and square footage of plant canopy. It is not a sales and use tax, a tax upon income, or a tax upon real property.

The Cannabis Business Tax is a general tax enacted solely for general governmental purposes of the City and not for specific purposes. All of the proceeds from the tax imposed by this article shall be placed in the City's general fund and be available for any legal municipal purpose. ( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.030. Intent.

The intent of this article is to levy a tax on all Cannabis Businesses that operate in the City, regardless of whether such business would have been legal at the time this article was adopted. Nothing in this article shall be interpreted to authorize or permit any business activity that would not otherwise be legal or permissible under laws applicable to the activity at the time the activity is undertaken. ( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.040. Definitions.

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(c) "Cannabis product" means raw cannabis that has undergone a process whereby the raw agricultural product has been transformed into a concentrate, an edible product, or a topical product. "Cannabis product" also means marijuana products as defined by Section 11018.1 of the California Health and Safety Code and is not limited to medical cannabis products. (d) "Canopy" means all areas occupied by any portion of a cannabis plant whether contiguous or noncontiguous on any one site. When plants occupy multiple horizontal planes (as when plants are placed on shelving above other plants) each plane shall be counted as a separate canopy area. (e) "Cannabis business" means any business activity involving cannabis, including but not limited to cultivating, transporting, distributing, manufacturing, compounding, converting, processing, preparing, storing, packaging, delivering, testing, dispensing, retailing and wholesaling of cannabis, of cannabis products or of ancillary products and accessories, whether or not carried on for gain or profit. (f) "Cannabis business tax" or "business tax," means the tax due pursuant to this article for engaging in cannabis business in the City.
(g) "Commercial cannabis cultivation" means cultivation in the course of conducting a cannabis business. (h) "City permit" means a permit issued by the City to a person to authorize that person to operate or engage in a cannabis business.
(i) "Cultivation" means any activity involving the planting, growing, harvesting, drying, curing, grading, or trimming of cannabis and includes, but is not limited to, the operation of a nursery. (j) "Distribution" shall have the same definition as set forth in California Business and Professions Code § 26001, as may be amended from time to time.
(k) "Distributor" shall mean persons engaging in Distribution. (l) "Employee" means each and every person engaged in the operation or conduct of any business, whether as owner, member of the owner's family, partner, associate, agent, manager or solicitor, and each and every other person employed or working in such business for a wage, salary, commission, barter or any other form of compensation.
(m) "Engaged in business as a cannabis business" means the commencing, conducting, operating, managing or carrying on of a cannabis business, whether done as owner, or by means of an officer, agent, manager, employee, or otherwise, whether operating from a fixed location in the City or coming into the City from an outside location to engage in such activities. A person shall be deemed engaged in business within the City if:

1. Such person or person's employee maintains a fixed place of business within the City for the benefit or partial benefit of such person;

2. Such person or person's employee owns or leases real property within the City for business purposes;

3. Such person or person's employee regularly maintains a stock of tangible personal property in the City for sale in the ordinary course of business;

4. Such person or person's employee regularly conducts solicitation of business within the City; or

5. Such person or person's employee performs work or renders services in the City.

The foregoing specified activities shall not be a limitation on the meaning of "engaged in business." (n) "Evidence of doing business" means evidence such as, without limitation, use of signs, circulars, cards or any other advertising media, including the use of internet or telephone solicitation, or Created: 2022-05-13 14:23:07 [EST]
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representation to a government agency or to the public that such person is engaged in a cannabis business in the City.
(o) "Fiscal year" means July 1 through June 30 of the following calendar year. (p) "Gross receipts," except as otherwise specifically provided, means, whether designated a sales price, royalty, rent, commission, dividend, or other designation, the total amount (including all receipts, cash, credits and property of any kind or nature) received or payable for sales of goods, wares or merchandise or for the performance of any act or service of any nature for which a charge is made or credit allowed (whether such service, act or employment is done as part of or in connection with the sale of goods, wares, merchandise or not), without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, interest paid or payable, losses or any other expense whatsoever. However, the following shall be excluded from gross receipts:

1. Cash discounts where allowed and taken on sales;

2. Any tax required by law to be included in or added to the purchase price and collected from the consumer or purchaser;

3. Such part of the sale price of any property returned by purchasers to the seller as refunded by the seller by way of cash or credit allowances or return of refundable deposits previously included in gross receipts;

4. Receipts derived from the occasional sale of used, obsolete or surplus trade fixtures, machinery or other equipment used by the taxpayer in the regular course of the taxpayer's business;

5. Cash value of sales, trades or transactions between departments or units of the same business;

6. Whenever there are included within the gross receipts amounts which reflect sales for which credit is extended and such amount proved uncollectible in a subsequent year, those amounts may be excluded from the gross receipts in the year they prove to be uncollectible; provided, however, if the whole or portion of such amounts excluded as uncollectible are subsequently collected they shall be included in the amount of gross receipts for the period when they are recovered;

7. Receipts of refundable deposits, except that such deposits when forfeited and taken into income of the business shall not be excluded when in excess of one dollar;

8. Amounts collected for others where the business is acting as an agent or trustee and to the extent that such amounts are paid to those for whom collected. These agents or trustees must provide the finance department with the names and the addresses of the others and the amounts paid to them. This exclusion shall not apply to any fees, percentages, or other payments retained by the agent or trustees.
(q) "Lighting" means a source of light that is primarily used for promoting the biological process of plant growth. Lighting does not include sources of light that primarily exist for the safety or convenience of staff or visitors to the facility, such as emergency lighting, walkway lighting, or light admitted via small skylights, windows or ventilation openings.
(r) "Manufacture" shall have the same definition as set forth in California Business and Professions Code § 26001, as may be amended from time to time.
(s) "Manufacturer" shall have the same definition set forth in California Business and Professions Code § 26001, as may be amended from time to time.
(t) "Nursery" means a facility or part of a facility that is used only for producing clones, immature plants, seeds, and other agricultural products used specifically for the planting, propagation, and cultivation of cannabis.

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(u) "Person" means an individual, firm, partnership, joint venture, association, corporation, limited liability company, estate, trust, business trust, receiver, syndicate, or any other group or combination acting as a unit, whether organized as a nonprofit or for-profit entity, and includes the plural as well as the singular number.
(v) "Sale" means and includes any sale, exchange, or barter. (w) "State" means the State of California.
(x) "State license," "license," or "registration" means a state license issued pursuant to California Business & Professions Code Sections 19300, et seq. or other applicable state law. (y) "Tax Administrator" means the Finance Director of the City of California City or his or her designee. (z) "Testing Laboratory" means a cannabis business that (i) offers or performs tests of medical cannabis or medical cannabis products, (ii) offers no service other than such tests, (iii) sells no products, excepting only testing supplies and materials, (iv) is accredited by an accrediting body that is independent from all other persons involved in the medical cannabis industry in the state and (v) is registered with the State Department of Public Health.
( Ord. No. 17-748, § 1, 6-6-2017; Ord. No. 21-786 , § 2, 4-27-2021) Sec. 3-2.8.050. Tax Imposed.
(a) Beginning July 1, 2018, there is imposed upon each person who is engaged in business as a cannabis business a cannabis business tax.
(b) The initial rate of the cannabis business tax shall be as follows:

1. For every person who is engaged in commercial cannabis cultivation in the City:
a. Seven dollars ($7.00) annually per square foot of canopy space in facility that uses exclusively artificial lighting.
b. Five dollars ($5.00) annually per square foot of canopy space in a facility that uses a combination of natural and supplemental artificial lighting.
c. One dollar ($1.00) annually per square foot of canopy space in a facility that uses no artificial lighting.
d. Fifty cents ($0.50) annually per square foot of canopy space for any nursery.

2. For every person who engages in the operation of a testing laboratory: 2% of gross receipts.

3. For every person who engages in manufacturing: 1% of gross receipts.

4. For every person who engages in distribution: .5% of gross receipts.

5. For every person who engages in a cannabis business not identified in Subsection 1. through 4.: 6% of gross receipts.
(c) The City Council may, by resolution or ordinance, adjust the rate of the cannabis business tax. However, in no event may the City Council set any adjusted rate that exceeds the maximum rate calculated pursuant to subdivision (d) of this section for the date on which the adjusted rate will commence. (d) The maximum rate shall be calculated as follows:

1. For every person who is engaged in commercial cannabis cultivation in the City:
a. Through June 30, 2021, the maximum rate shall be:

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i. Seven dollars ($7.00) annually per square foot of canopy space in a facility that uses exclusively artificial lighting.
ii. Five dollars ($5.00) annually per square foot of canopy space in a facility that uses a combination of natural and supplemental artificial lighting. iii. One dollar ($1.00) annually per square foot of canopy space in a facility that uses no artificial lighting.
iv. Fifty cents ($.50) annually per square foot of canopy space for any nursery. b. On July 1, 2021 and on each July 1 thereafter, the maximum annual tax rate per square foot of each type of canopy space shall increase by the percentage change between January of the calendar year prior to such increase and January of the calendar year of the increase in the Consumer Price Index ("CPI") for all urban consumers in the Los-Angeles-Riverside-Orange County areas as published by the United States Government Bureau of Labor Statistics. However, no CPI adjustment resulting in a decrease of any tax imposed by this subsection shall be made.

2. For every person who engages in a cannabis business in the City other than commercial cannabis cultivation the maximum rate shall be the rate set forth in subdivision (b) of this section. ( Ord. No. 17-748, § 1, 6-6-2017; Ord. No. 21-786 , § 3, 4-27-2021) Sec. 3-2.8.060. Reporting and Remittance of Tax.
(a) The cannabis business tax imposed by this article shall be paid, in arrears, on a quarterly basis. For commercial cannabis cultivation, the tax due for each calendar quarter shall be based on the square footage of the business's canopy space during the quarter and the rate shall be 25% of the applicable annual rate. For all other cannabis businesses activities, the tax due for each calendar quarter shall be based on the gross receipts for the quarter.
(b) Each person owing cannabis business tax for a calendar quarter shall, no later than the last day of the month following the close of the calendar quarter, file with the Tax Administrator a statement of the tax owed for that calendar quarter and the basis for calculating that tax. The Tax Administrator may require that the statement be submitted on a form prescribed by the Tax Administrator. The tax for each calendar quarter shall be due and payable on that same date as the statement for the calendar quarter is due. (c) Upon cessation of a cannabis business, tax statements and payments shall be immediately due for all calendar quarters up to the calendar quarter during which cessation occurred. (d) The Tax Administrator may, at his or her discretion, establish shorter report and payment periods for any taxpayer as the Tax Administrator deems necessary to ensure collection of the tax. The Tax Administrator may also require that a deposit, to be applied against the taxes for a calendar quarter, be made by a taxpayer at the beginning that calendar quarter. In no event shall the deposit required by the Tax Administrator exceed the tax amount he or she projects will be owed by the taxpayer for the calendar quarter. The Tax Administrator may require that a taxpayer make payments via a cashier's check, money order, wire transfer, or similar instrument.
(e) For purposes of this section, the square feet of canopy space for a business shall be rebuttably presumed to be no less than the maximum square footage of canopy allowed by the business's City permit for commercial cannabis cultivation, or, in the absence of a City permit, the square footage shall be the maximum square footage of canopy for commercial cannabis cultivation allowed by the state license type. In no case shall canopy square footage which is authorized by the permit or license but not utilized for cultivation be excluded from taxation unless the Tax Administrator is informed in writing, prior to the period for which the space will not be used, that such space will not be used.

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( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.070. Payments and Communications—Timely Remittance.

Whenever any payment, statement, report, request or other communication is due, it must be received by the Tax Administrator on or before the final due date. A postmark will not be accepted as timely remittance. If the due date would fall on a Saturday, Sunday or a holiday, the due date shall be the next regular business day on which the City is open to the public.
( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.080. Payment—When Taxes Deemed Delinquent.

Unless otherwise specifically provided under other provisions of this article, the taxes required to be paid pursuant to this article shall be deemed delinquent if not received by the Tax Administrator on or before the due date as specified in Sections 3-2.8.060 and 3-2.8.070.
( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.090. Notice not Required by the City.

The City may as a courtesy send a tax notice to the business. However, the Tax Administrator is not required to send a delinquency or other notice or bill to any person subject to the provisions of this article. Failure to send such notice or bill shall not affect the validity of any tax or penalty due under the provisions of this article. ( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.100. Penalties and Interest.
(a) Any person who fails or refuses to pay any cannabis business tax required to be paid pursuant to this article on or before the due date shall pay penalties and interest as follows:

1. A penalty equal to 10% of the amount of the tax, in addition to the amount of the tax, plus interest on the unpaid tax calculated from the due date of the tax at the rate of 1.0% per month.

2. If the tax remains unpaid for a period exceeding one calendar month beyond the due date, an additional penalty equal to 25% of the amount of the tax, plus interest at the rate of 1.0% per month on the unpaid tax and on the unpaid penalties.

3. Interest shall be applied at the rate of 1.0% per month on the first day of the month for the full month, and will continue to accrue monthly on the tax and penalty until the balance is paid in full. (b) Whenever a check or electronic payment is submitted in payment of a cannabis business tax and the payment is subsequently returned unpaid by the bank for any reason, the taxpayer will be liable for the tax amount due plus any fees, penalties and interest as provided for in this section, and any other amount allowed under state law.
( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.110. Refunds and Credits.
(a) No refund shall be made of any tax collected pursuant to this article, except as provided in Section 3-2.8.120.

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(b) No refund of any tax collected pursuant to this article shall be made because of the discontinuation, dissolution, or other termination of a business.
( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.120. Refunds and Procedures.
(a) Whenever the amount of any cannabis business tax, penalty or interest has been overpaid, paid more than once, or has been erroneously collected or received by the City under this article, it may be refunded to the claimant who paid the tax provided that a written claim for refund is filed with the Tax Administrator within one year of the date the tax was originally due and payable. (b) The Tax Administrator, his or her designee or any other City officer charged with the administration of this article shall have the right to examine and audit all the books and business records of the claimant in order to determine the eligibility of the claimant to the claimed refund. No claim for refund shall be allowed if the claimant refuses to allow such examination of claimant's books and business records after request by the Tax Administrator to do so.
(c) In the event that the cannabis business tax was erroneously paid and the error is attributable to the City, the City shall refund the amount of tax erroneously paid up to one year from when the error was identified. ( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.130. Personal Cultivation not Taxed.

The provisions of this article shall not apply to personal cannabis cultivation as defined in the "California Control, Regulate and Tax Adult Use of Marijuana Initiative". This article shall not apply to personal use of cannabis that is specifically exempted from state licensing requirements, that meets the definition of personal use or equivalent terminology under state law, and for which the individual receives no compensation whatsoever related to that personal use.
( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.140. Administration of the Tax.
(a) It shall be the duty of the Tax Administrator to collect the taxes, penalties, fees, and perform the duties required by this article.
(b) For purposes of administration and enforcement of this article generally, the Tax Administrator may from time to time promulgate such administrative interpretations, rules, and procedures consistent with the purpose, intent, and express terms of this article as he or she deems necessary to implement or clarify such provisions or aid in enforcement.
(c) The Tax Administrator may take such administrative actions as needed to administer the tax, including but not limited to:

1. Provide to all cannabis business taxpayers forms for the reporting of the tax;

2. Provide information to any taxpayer concerning the provisions of this article;

3. Receive and record all taxes remitted to the City as provided in this article;

4. Maintain records of taxpayer reports and taxes collected pursuant to this article;

5. Assess penalties and interest to taxpayers pursuant to this article; Created: 2022-05-13 14:23:07 [EST]
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6. Determine amounts owed and enforce collection pursuant to this article. ( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.150. Appeal Procedure.

Any taxpayer aggrieved by any decision of the Tax Administrator with respect to the amount of tax, interest, penalties and fees, if any, due under this article may appeal to the City Council by filing a notice of appeal with the City Clerk within thirty (30) days of the serving or mailing of the determination of tax due. The City Clerk shall fix a time and place for hearing such appeal, and the City Clerk shall give notice in writing to such operator at the last known place of address. The finding of the City Council shall be final and conclusive and shall be served upon the appellant in the manner prescribed by this article for service of notice of hearing. Any amount found to be due shall be immediately due and payable upon the service of the notice. ( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.160. Enforcement—Action to Collect.

Any taxes, penalties and/or fees required to be paid under the provisions of this article shall be deemed a debt owed to the City. Any person owing money to the City under the provisions of this article shall be liable in an action brought in the name of the City for the recovery of such debt. The provisions of this section shall not be deemed a limitation upon the right of the City to bring any other action including criminal, civil and equitable actions, based upon the failure to pay the tax, penalties and/or fees imposed by this article or the failure to comply with any of the provisions of this article.
( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.170. Apportionment.

If a business subject to the tax is operating both within and outside the City, it is the intent of the City to apply the cannabis business tax so that the measure of the tax fairly reflects the proportion of the taxed activity actually carried on in the City. To the extent federal or state law requires that any tax due from any taxpayer be apportioned, the taxpayer may indicate said apportionment on his or her tax return. The Tax Administrator may promulgate administrative procedures for apportionment as he or she finds useful or necessary. ( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.180. Constitutionality and Legality.

This tax is intended to be applied in a manner consistent with the United States and California Constitutions and state law. None of the tax provided for by this article shall be applied in a manner that causes an undue burden upon interstate commerce, a violation of the equal protection or due process clauses of the Constitutions of the United States or the State of California or a violation of any other provision of the California Constitution or state law. If a person believes that the tax, as applied to him or her, is impermissible under applicable law, he or she may request that the Tax Administrator release him or her from the obligation to pay the impermissible portion of the tax.
( Ord. No. 17-748, § 1, 6-6-2017)
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Sec. 3-2.8.190. Audit and Examination of Premises and Records. (a) For the purpose of ascertaining the amount of cannabis business tax owed or verifying any representations made by any taxpayer to the City in support of his or her tax calculation, the Tax Administrator shall have the power to inspect any location where commercial cannabis cultivation occurs and to audit and examine all books and records (including, but not limited to bookkeeping records, state and federal income tax returns, and other records relating to the gross receipts of the business) of persons engaged in cannabis businesses.

In conducting such investigation, the Tax Administrator shall have the power to inspect any equipment, such as computers or point of sale machines, that may contain such records. (b) It shall be the duty of every person liable for the collection and payment to the City of any tax imposed by this article to keep and preserve, for a period of at least three (3) years, all records as may be necessary to determine the amount of such tax as he or she may have been liable for the collection of and payment to the City, which records the Tax Administrator or his/her designee shall have the right to inspect at all reasonable times.
( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.200. Other Licenses, Permits, Taxes, Fees or Charges. (a) Nothing contained in this article shall be deemed to repeal, amend, be in lieu of, replace or in any way affect any requirements for any permit or license required by, under or by virtue of any provision of any other article of this Code or any other ordinance or resolution of the City, nor be deemed to repeal, amend, be in lieu of, replace or in any way affect any tax, fee or other charge imposed, assessed or required by, under or by virtue of any other article of this Code or any other ordinance or resolution of the City. Any references made or contained in any other article of this Code to any licenses, license taxes, fees, or charges, or to any schedule of license fees, shall be deemed to refer to the licenses, license taxes, fees or charges, or schedule of license fees, provided for in other article of this Code. (b) Notwithstanding subdivision (a) of this section a cannabis business shall not be required to pay the license fee required by Division 2 of Article 3 of Chapter 2 of Title 3 of this Code so long as all of business's activities within the City that would require payment of a license fee are activities subject to the cannabis business tax. (c) The Tax Administrator may revoke or refuse to renew the license required by Section 3-3.2.201 of this Code for any business that is delinquent in the payment of any tax due pursuant to this article or that fails to make a deposit required by the Tax Administrator pursuant to Section 3-2.8.060. ( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.210. Payment of Tax does not Authorize Unlawful Business. (a) The payment of a cannabis business tax required by this article, and its acceptance by the City, shall not entitle any person to carry on any cannabis business unless the person has complied with all of the requirements of this Code and all other applicable state laws. (b) No tax paid under the provisions of this article shall be construed as authorizing the conduct or continuance of any illegal or unlawful business, or any business in violation of any local or state law. ( Ord. No. 17-748, § 1, 6-6-2017)
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Sec. 3-2.8.220. Deficiency Determinations.

If the Tax Administrator is not satisfied that any statement filed as required under the provisions of this article is correct, or that the amount of tax is correctly computed, he or she may compute and determine the amount to be paid and make a deficiency determination upon the basis of the facts contained in the statement or upon the basis of any information in his or her possession or that may come into his or her possession within three (3) years of the date the tax was originally due and payable. One or more deficiency determinations of the amount of tax due for a period or periods may be made. When a person discontinues engaging in a business, a deficiency determination may be made at any time within three (3) years thereafter as to any liability arising from engaging in such business whether or not a deficiency determination is issued prior to the date the tax would otherwise be due. Whenever a deficiency determination is made, a notice shall be given to the person concerned in the same manner as notices of assessment are given under Section 3-2.8.240. ( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.230. Failure to Report—Nonpayment, Fraud.
(a) Under any of the following circumstances, the Tax Administrator may make and give notice of an assessment of the amount of tax owed by a person under this article at any time:

1. If the person has not filed a complete statement required under the provisions of this article;

2. If the person has not paid the tax due under the provisions of this article;

3. If the person has not, after demand by the Tax Administrator, filed a corrected statement, or furnished to the Tax Administrator adequate substantiation of the information contained in a statement already filed, or paid any additional amount of tax due under the provisions of this article; or

4. If the Tax Administrator determines that the nonpayment of any business tax due under this article is due to fraud, a penalty of 25% of the amount of the tax shall be added thereto in addition to penalties and interest otherwise stated in this article and any other penalties allowed by law. (b) The notice of assessment shall separately set forth the amount of any tax known by the Tax Administrator to be due or estimated by the Tax Administrator, after consideration of all information within the Tax Administrator's knowledge concerning the business and activities of the person assessed, to be due under each applicable section of this article, and shall include the amount of any penalties or interest accrued on each amount to the date of the notice of assessment.
( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.240. Tax Assessment—Notice Requirements.

The notice of assessment shall be served upon the person either by personal delivery, or by a deposit of the notice in the United States mail, postage prepaid thereon, addressed to the person at the address of the location of the business or to such other address as he or she shall register with the Tax Administrator for the purpose of receiving notices provided under this article; or, should the person have no address registered with the Tax Administrator for such purpose, then to such person's last known address. For the purposes of this section, a service by mail is complete at the time of deposit in the United States mail. ( Ord. No. 17-748, § 1, 6-6-2017)
Created: 2022-05-13 14:23:07 [EST]
(Supp. No. 10)

Page 11 of 12 ends

Sec. 3-2.8.250. Tax Assessment—Hearing, Application and Determination.

Within thirty (30) days after the date of service the person may apply in writing to the Tax Administrator for a hearing on the assessment. If application for a hearing before the City is not made within the time herein prescribed, the tax assessed by the Tax Administrator shall become final and conclusive. Within thirty (30) days of the receipt of any such application for hearing, the Tax Administrator shall cause the matter to be set for hearing before him or her no later than thirty (30) days after the receipt of the application, unless a later date is agreed to by the Tax Administrator and the person requesting the hearing. Notice of such hearing shall be given by the Tax Administrator to the person requesting such hearing not later than five (5) days prior to such hearing. At such hearing said applicant may appear and offer evidence why the assessment as made by the Tax Administrator should not be confirmed and fixed as the tax due. After such hearing the Tax Administrator shall determine and reassess the proper tax to be charged and shall give written notice to the person in the manner prescribed in Section 3-2.8.240 for giving notice of assessment.
( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.260. Conviction for Violation—Taxes not Waived.

The conviction and punishment of any person for failure to pay the required tax shall not excuse or exempt such person from any civil action for the tax debt unpaid at the time of such conviction. No civil action shall prevent a criminal prosecution for any violation of the provisions of this article or of any state law requiring the payment of all taxes.
( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.270. Violation Deemed Misdemeanor.

Any person violating any of the provisions of this article shall be guilty of a misdemeanor. ( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.280. Severability.

If any provision of this article, or its application to any person or circumstance, is determined by a court of competent jurisdiction to be unlawful, unenforceable or otherwise void, that determination shall have no effect on any other provision of this article or the application of this article to any other person or circumstance and, to that end, the provisions hereof are severable.
( Ord. No. 17-748, § 1, 6-6-2017)
Sec. 3-2.8.290. Remedies Cumulative.

All remedies and penalties prescribed by this article or which are available under Title 1 of the City Code and any other provision of law or equity are cumulative. The use of one or more remedies by the City shall not bar the use of any other remedy for the purpose of enforcing the provisions of this article. ( Ord. No. 17-748, § 1, 6-6-2017)
Created: 2022-05-13 14:23:07 [EST]
(Supp. No. 10)

Page 12 of 12 ends

Sec. 3-2.8.300. Amendment or Repeal.

This article may be repealed or amended by the City Council without a vote of the people to the extent allowed by law. However, as required by Article XIII C of the California Constitution, voter approval is required for any amendment that would increase the rate of any tax levied pursuant to this article. The people of the City of California City affirm that the following actions shall not constitute an increase of the rate of a tax:
(a) The restoration of the rate of the tax to a rate that is no higher than that set by this article, if the City Council has acted to reduce the rate of the tax;
(b) An action that interprets or clarifies the methodology of the tax, or any definition applicable to the tax, so long as interpretation or clarification (even if contrary to some prior interpretation or clarification) is not inconsistent with the language of this article; or
(c) The collection of the tax imposed by this article, even if the City had, for some period of time, failed to collect the tax.
( Ord. No. 17-748, § 1, 6-6-2017)
ATTACHMENT 2
Audit Inspection Form
CANNABIS FACILITY SITE INSPECTION-TO SATISFY ANNUAL AUDIT REQUIREMENT _PER MUNICIPAL CODE Sec. 5-6.1405. - Inspection and Enforcement

_ Date of =e Business ? pa tame AEREA | inspection: AAI pr 27445 dama Cru) Caliban City 93 SUC j ¡ ¡ Address HH Ww Mano $4 Pagadena 10% —Bubmos adde | California City Operation | MCultivation. 回 Disiribufion. [Retail Dispensary : ; ; L Commercial Cannabis | ?ye。 Shon storetont Peter oe urer j (te Gouralcr 310 > < 60 Inspection Form Contact Name & Phone
POSTED PERMITS + LISENCES

Business License Operations Assessment Notes/Types of products Manufacturing Equipment VA AHWS sec
O ves ee Oo + Present?
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City Permit ree If yes, [Volatile [JNon-Volatile
E yes O No O 22 Retail Delivery Activities?
# 10150109 Dryes No [Planned
State License aces Tax Payments Up to ho 4y docs available ate
BYES ONO Ol 22 OlYes. No unsure

# co Y - 0004046

Auditor Use Only: INSPECTOR OBSERVED CULTIVATION (BY
Wed S Q (天 Cultivation Measurement + Lighting Assessment* ; | Room Lightin | Type 9 Description Measurement
Artificial conc roo 10 119 fect Mixed \ tabu t LJ Natural NE a ne L flower ryums 18,7 Kutt ixe y tabl O Natural ió
ES Artificial D AI Voom tN von, IA Y 17m x Abate Yard, O Mixed Wot YA use Inspector Signature O Natural
*if additional room is needed, write on back
Additional Inspector Notes:
¥ NY V
PA ATID Rep lus
Completed by Contracted Service Provider, Core Compliance LLC lg ¡CORE

Completed by Contracted Service Provider, Core Compliance tre” = comune

ATTACHMENT 5
Appellant’s Appeal
Notice of Appeal
Notice is hereby given as outlined in Article 6 of the California City Municipal Code. Sec. 5-6.602 – Written request for Appeal
I will be appealing the following: Sec 3-2.8.070, Sec. 3-2.8.080, Sec. 3-2.8.060(a)-(c) Name of Licensee: Herbs Cali Krush LLC
Point of Contact: Herbert Gonzalez
Address of Subject Property: 22495 Jamison Street, California City, Ca 93505 Assessors Parcel Number: (APN): 302-062-24
Local Permit No.:20230109
Local Permit Type: Cultivation
State Permit No. CCL19-0003035
State Permit Type: Cultivation-Small Indoor
This is the written request for an appeal.

I will be paying the filing fee of $85 to the city clerk today Sincerely,
-------------------------
Herbert Gonzalez, Owner
ATTACHMENT 6
Special Counsel Ground Rules

CITY ADMINISTRATIVE HEARING APPEAL BRIEFING SCHEDULE

1. Notice of Appeal

2. Scheduling of Hearing
• Date Hearing is Scheduled: October 28, 2024 at 1:00 p.m. in the California City City Council Chambers located at 21000 Hacienda Boulevard, California City, California 93505.

3. Brief by Appellant (Business/Operator)
• Deadline for Appellant's Brief and Proposed City Council Decision: October 24, 2024 at 12:00 p.m.
o The appellant submits a detailed written brief outlining arguments, evidence, and supporting documents and identification of any witnesses for the hearing.
o Appellant submits brief via email to special counsel, Joaquin Vazquez, at [email protected], and Deputy City Clerk, Leanndrea Weible, at [email protected] no later than October 24, 2024 at 12:00 p.m.

4. Brief by City Staff/City Attorney
• Deadline for Response Brief and Proposed City Council Decision: October 24, 2024 at 12:00 p.m.
o City staff/City Attorney submits their response, addressing the appellant's arguments and providing rebuttal evidence or documentation and identifying any witnesses for the hearing.
o Appellant submits brief via email to special counsel, Joaquin Vazquez, at [email protected], and Deputy City Clerk, Leanndrea Weible, at [email protected] no later than October 24, 2024 at 12:00 p.m.

5. City Council Hearing
• Date of Hearing: October 28, 2024 at 1:00 p.m. in the California City City Council Chambers located at 21000 Hacienda Boulevard, California City, California 93505.
o The hearing takes place before the City Council. Both the appellant and the City staff/legal counsel present their cases, call witnesses if necessary, and answer questions from the Council. The City Council’s decision is final.

PROCEDURAL RULES FOR CITY ADMINISTRATIVE HEARING APPEAL

1. Ex Parte Communications
• Definition: Ex parte communications are direct or indirect communications between any party involved in the appeal (appellant, City staff, witnesses, or legal counsel) and members of the City Council outside the formal hearing process.
• Prohibition:
o No party, representative, or witness may engage in ex parte communications with City Council members regarding the subject matter of the appeal.
o This includes emails, letters, phone calls, or informal conversations. • Disclosure:
o If any ex parte communication occurs, it must be disclosed on the record at the beginning of the hearing. The Council member involved must report the substance of the communication.
o Based on the nature of the communication, the Council may decide to recuse the member or take other corrective actions to ensure fairness.

2. Evidence Submissions
• General Rule of Evidence:
o The hearing will follow an informal evidentiary process. While the rules of evidence applicable in courts do not strictly apply, only relevant, reliable, and probative evidence will be admitted.
o All parties must submit any documentary evidence, exhibits, or reports by the deadline set in the briefing schedule.
• Witness Testimony:
o Witnesses may provide sworn testimony during the hearing. o The party calling the witness is responsible for providing an accurate summary of the witness’s anticipated testimony as part of their written submissions.
• Cross-Examination:
o Parties will have the opportunity to cross-examine witnesses presented by the opposing party.
o City Council members may also ask questions of witnesses to clarify evidence.

3. Hearsay
• Definition: Hearsay is a statement made outside the hearing, offered into evidence to prove the truth of the matter asserted.
• Admissibility:
o Hearsay evidence is admissible in the hearing but is generally given less weight than direct testimony or documentary evidence unless corroborated by other credible evidence.
o Parties should identify any hearsay evidence in their briefs and explain its relevance and reliability.
o The City Council may give little or no weight to hearsay that is not supported by other reliable evidence.

4. Relevance and Weight of Evidence
• Relevance:
o All evidence presented must relate to the issues on appeal. The City Council may exclude irrelevant evidence.
• Weight:
o The City Council has the discretion to determine the weight of the evidence presented. The credibility of witnesses, the consistency of documentary evidence, and the probative value of all evidence will be considered when determining the final decision.

5. Public Participation
• Public Testimony:
o The hearing will be open to the public. However, only parties to the appeal and any invited witnesses may testify or submit evidence. • Public Comment Period:
o There will be a public comment period during which members of the public may speak, in accordance with Brown Act requirements. This period will be limited in time, and public comments will not be considered as formal evidence unless corroborated by documentary evidence or testimony from involved parties.

6. Procedural Objections
• Raising Objections:
o Any party may raise procedural objections during the hearing, including objections to the admission of evidence or witness testimony. • Timeliness:
o Objections must be made promptly at the time of the alleged procedural error or at the earliest opportunity. Failure to object in a timely manner may result in a waiver of the objection.

7. Deliberations and Decision
• Deliberation:
o Following the presentation of evidence and arguments, the City Council will deliberate on the appeal.
• Decision:
o The City Council will issue a written decision based on the evidence presented during the hearing.

ORAL ARGUMENT/PRESENTATION SCHEDULE FOR APPEAL HEARING

1. Introduction and Opening Statements by City Council
o The Mayor, or designee, opens the hearing by outlining the procedural rules and the issues on appeal.
o Brief introductions of the appellant, City staff, legal representatives, and any other participants.

2. Appellant’s Opening Argument
o The appellant (or their attorney/representative) presents their case, focusing on the reasons the City’s decision should be overturned. o Summary of key arguments, evidence, and legal standards supporting the appeal.
o Presentation of any witnesses (if any), who may give brief testimony. o Visual aids or exhibits (e.g., maps, photos) may be used to enhance the argument.

3. City Staff/Legal Counsel Response
o The City staff/City Attorney presents their defense of the original decision, responding directly to the appellant’s arguments.
o Explanation of how the City’s decision was consistent with the law and the facts of the case.
o Presentation of supporting evidence, rebutting the appellant’s claims. o City may also present witnesses to support its position.

4. Cross-Examination of Witnesses (if any)
o The appellant and City staff may cross-examine any witnesses presented by the opposing party.
o Cross-examination should be limited to clarifying the testimony and challenging the credibility of witnesses if necessary.

5. Questions from City Council Members
o City Council members may ask questions of both the appellant and the City staff, seeking clarification on specific issues, evidence, or legal arguments.
o Questions may be directed to witnesses, if applicable. o Both parties must answer questions directly and succinctly, avoiding unnecessary repetition.

6. Public Comment Period
o Members of the public may briefly address the City Council regarding the appeal.
o Public comments will not be considered formal evidence unless supported by the parties involved.

7. Appellant’s Closing Argument
o The appellant presents a closing argument, summarizing the key points of their case and reinforcing why the City Council should reverse the original decision.

8. City Staff/Legal Counsel Closing Argument
o City staff/City Attorney presents a closing argument, summarizing the reasons why the original decision should be upheld.

10. City Council Deliberation and Decision
o After closing arguments, the City Council deliberates on the evidence and arguments presented.
o The Council may announce its decision immediately or take the matter under advisement and issue a written decision within a specified period.

ATTACHMENT 7
Appellant’s Brief
Name of Licensee: Herbs Cali Krush LLC
Point of Contact: Herbert Gonzalez Owner
Address of Subject Property: 22495 Jamison Street, California City, Ca 93505 Assessors Parcel Number: (APN): 302-062-24
Local Permit No.:20230109
Local Permit Type: Cultivation
State Permit No. CCL19-0003035
State Permit Type: Cultivation-Small Indoor
My name is Herbert Gonzalez I am a direct product of the war of drugs. I am a social equity company verified by the Department of Cannabis Control.

The audit findings from January – December of 2020 are incorrect I do not owe any money. I did not have any flowering plants at this time. I also didn’t have enough power nor a generator with the capacity to operate a bloom room. I only had one warehouse completed which only has 1,536 square feet of flowering canopy but like I said I had NO flowering plants at this time.

The city has no evidence of flowering plants in my buildings from the time in question.

The only evidence is of an email of me contacting the city desperately trying to figure this out. But the city ignored me this entire time and now they are even adding close to $35,000 in penalties and interest when they have failed to address this matter due to lack of staƯ and knowledge… this is there last attempt to harass me and try to put me out of business because everything else failed!
The city called the DCC Department of Cannabis Control to shut my business down. When the DCC came out to investigate the city’s allegations they didn’t agree with the city! The DCC who governs over my state cannabis license allowed me to operate and renewed all my licenses. I am in good standing with all governing agencies.

The fire department Jeremy Kosic and Kristy Hightower have made sure that I do not operate by citing me and harassing me the entire time up until Jeremy got fire. Since 2021 Jeremy started to target me and when Kristy came onboard, he made her come and get me too. 2022 will be the same year of constant inspections and harassments.

In 2023 I was inspected by the fire department every week from January to September with the intention to shut me down and not allow me to operate. Harassing me and my employees and even citing a marine for having his service dog on the premises. Kristy HighTower showed up one day with a police oƯicer because she said she didn’t feel safe coming to do her job. Then she told us she can come whenever she wants without notice! Even reporters came out to cover the story of a marine getting a fine for having a service dog on the premises. Is this not a federal law?
In 2023 I put my property up for sale because of all the corruption and crime in the city and the city not allowing me to operate. I had an out-of-town buyer come to see the property and they came in an RV, and I was cited for that too, Scaring the buyer away.

All these years after I have paid all my fees permits tax excise etc.

I am one of the first ones to get a license. I have been here from the beginning going on 9 years now. I have paid the city hundreds of thousands of dollars in permits, licenses, building permits etc. I spent three million dollars developing this facility and the city seems to only want me to go out of business.

I pay close to $25,000 in property taxes yearly and I have generated ZERO This case should be dismissed due to lack of evidence. And the DCC also agreed with me because they didn’t shut me down like the city wanted and requested I have not made any money yet! No return on my investment! For the record I am not a newbie in the cannabis industry. This is rancho 3 I had other companies before the cannabis industry changed. I have an impeccable track record of paying all my taxes on time. From the very beginning with ranchos 1 and 2 I had an accountant making sure I was on track. This is why when California city called the DCC on me it didn’t work, and they didn’t shut me down!
The city wants to collect money well the city needs to allow us to operate so that we can generate money to share with the city hello!
The city lied about providing power to us! The city gave over 500 cultivation licenses and collected tons of money in fees. Ony 20 operating now because the city lied, because the city doesn’t have the capacity to process everything and there is or was corruption.

ATTACHMENT 8
Deputy City Attorney’s Brief
1 Item No. ____
CALIFORNIA CITY’S STAFF REPORT AND

ADMINISTRATIVE APPEAL BRIEF
DATED: October 24, 2024
TO: Honorable Mayor and City Council
FROM: Inge Elmes, Cannabis Tax Administrator; Brandon A. Sanchez, Attorney SUBJECT: Appeal of Notice of Violation dated June 10, 2024

SUMMARY
The appellant, Herbs Cali Krush, Inc., is appealing the City’s Notice of Violation dated June 10, 2024, which determined that Herbs Cali Krush owed $82,384.72 in taxes, penalties, and interest related to cannabis cultivation in the City.

City staff recommends that Council deny the appeal and uphold the Notice of Violation in its entirety.

BACKGROUND
A. Legal Background
Commercial cannabis cultivation is taxed at a given rate based on the square footage of canopy space and the type of cultivation (whether exclusively artificial lighting, combination of natural and supplemental artificial lighting, no artificial lighting, or a nursery).1 The tax rates for commercial cannabis cultivation in the City are as follows:
• Artificial Lighting: $7.00 per square foot of canopy space annually. • Combination Lighting: $5.00 per square foot of canopy space annually. • No Artificial Lighting: $1.00 per square foot of canopy space annually. • Nurseries: $0.50 per square foot of canopy space annually.

Taxes must be timely reported and remitted on a quarterly basis or they will be deemed delinquent.
2 For commercial cannabis cultivation, the tax due for each calendar quarter shall 1 CCMC, §§ 3-2.8.050(b), 3-2.8.050(d).
2 CCMC, §§ 3-2.8.060, 3-2.8.070, 3-2.8.080.
2 be based on the square footage of the business’s canopy space during the quarter and the rate shall be 25% of the applicable annual rate.3
The taxable square footage is presumed to be the maximum allowed by the City's permit or, if no City permit exists, the maximum allowed by State license.4 Unused authorized space is still taxable unless the Tax Administrator is notified in writing beforehand.5 Audits of commercial cannabis taxes are authorized by Section 3-2.8.190(a):
“For the purpose of ascertaining the amount of cannabis business tax owed or verifying any representations made by any taxpayer to the City in support of his or her tax calculation, the Tax Administrator shall have the power to inspect any location where commercial cannabis cultivation occurs and to audit and examine all books and records (including, but not limited to bookkeeping records, state and federal income tax returns, and other records relating to the gross receipts of the business) of persons engaged in cannabis businesses. In conducting such investigation, the Tax Administrator shall have the power to inspect any equipment, such as computers or point of sale machines, that may contain such records. (Italics added.)
Section 3-2.8.220 describes what occurs after an audit results in a deficiency in taxes remitted:

If the Tax Administrator is not satisfied that any statement filed as required under the provisions of this article is correct, or that the amount of tax is correctly computed, he or she may compute and determine the amount to be paid and make a deficiency determination upon the basis of the facts contained in the statement or upon the basis of any information in his or her possession or that may come into his or her possession within three (3) years of the date the tax was originally due and payable. One or more deficiency determinations of the amount of tax due for a period or periods may be made. When a person discontinues engaging in a business, a deficiency determination may be made at any time within three (3) years thereafter as to any liability arising from engaging in such business whether or not a deficiency determination is issued prior to the date the tax would otherwise be due. Whenever a deficiency determination is made, a notice shall be given to the person concerned in the same manner as notices of assessment are given under Section 3-2.8.240.
6 (Italics added.)
So after an audit, the City may make a deficiency determination and provide notice of the deficiency determination.

Deficiency determinations may be appealed under Section 3-2.8.150 according to the following appeal procedure:

Any taxpayer aggrieved by any decision of the Tax Administrator with respect to the amount of tax, interest, penalties and fees, if any, due under this article may appeal to the City Council by filing a notice of appeal with the City Clerk within thirty (30) days of the serving or mailing of the determination of tax due. The City Clerk shall fix a time and place for hearing such appeal, and the City Clerk shall give notice in writing to such operator at the last known place of address. The 3 CCMC, § 3-2.8.060(a).
4 CCMC, § 3-2.8.060(e).
5 CCMC, §
3-2.8.060(e).
6 Section 3-2.8.240 simply provides the manner of service (personal delivery or certified mail). 3 finding of the City Council shall be final and conclusive and shall be served upon the appellant in the manner prescribed by this article for service of notice of hearing. Any amount found to be due shall be immediately due and payable upon the service of the notice.

Thus, there is 30 days to appeal the deficiency determination to the City Council.

B. Factual Background
On January 6, 2020, Herbs Cali Krush commenced commercial cannabis activity in the City at the property located at 22495 Jamison Street.

In 2023, City staff completed an audit as authorized by Section 3-2.8.190. Specifically, on April 15, 2023, City staff inspected the Subject Property with the consent of Herbs Cali Krush. City inspectors observed 2,294.2 square feet of artificial light cultivation canopy.

Following conclusion of the audit, a deficiency determination was made under Section 3-

2.8.220. On August 3, 2023, the City issued a letter providing notice of the deficiency determination in a letter titled 2023 Commercial Cannabis Compliance Audit Determination (“Audit Determination Letter”). The Audit Determination Letter required the following amounts to be paid within 30 days: $82,384.72 in unpaid taxes, penalties, and interest. This amount was calculated based on 2,294.2 square feet, at a rate of $7 per square foot, for the prior 36 months, for a total base tax of $48,178.20 owed, plus penalties and interest in the amount of $34,206.52.

On June 10, 2024, the City issued a Notice of Violation that, among other things, demanded payment of the deficiency amount of $82,384.72 and alleged violations of CCMC sections 3-

2.8.070, 3-2.8.080, and 3-2.8.060(a)-(c).

On June 17, 2024, the Herbs Cali Krush filed an appeal contesting the existence of violations of Sections 3-2.8.070, 3-2.8.080, and 3-2.8.060(a)–(c).

To date, Herbs Cali Krush has not paid any taxes or filed any required tax forms for the deficiency period that is the subject of the Audit Determination Letter and Notice of Violation.

ANALYSIS
In this case, a number of these grounds are present and support upholding the June 7, 2024 Notice of Violation. The audits were properly completed according to Section 3-2.8.190, and then a deficiency determination was made under Section 3-2.8.220. The City gave notice of the deficiency in the form of the Audit Determination Letter in 2023. The City gave further notice of the deficiency in the form of the June 10, 2024 Notice of Violation. Each step was based on indisputable evidence and the requirements of the CCMC, all of which supports upholding the City’s determinations within the Notice of Violation.

Specifically, the deficiency determination was appropriately made based on actual measurements taken by the City with the consent of Herbs Cali Krush. On April 15, 2023, City code enforcement staff inspected the property and made the following measurements as documented in the Commercial Cannabis Inspection Form:
• Clone Room: 20'×19' [380 feet].
• 1 Table: 42'×2' [84 feet].
• 6 Flower Rooms with 4 Tables Each: 15.7'×4' [1507.2]. • Dry Room Trim Room: 19'×17' [323 feet].
4 These areas add up to a total of 2,294.2 square feet, as referenced in the Audit Determination Letter and June 10, 2024 Notice of Violation.

At a rate of $7.00 per square foot annually, Herbs Cali Krush owes $82,384.72 for the 2,294.2 feet of artificial light canopy space, for a period of time from the third quarter of 2020 to the second quarter of 2023.

The City’s Cannabis Tax Administrator is familiar with the City’s record keeping system for taxes. After a thorough review, as of the date of this staff report, the Cannabis Tax Administrator found that Herbs Cali Krush has never submitted tax forms or paid any local cannabis taxes, as required under the City’s cannabis business tax ordinance for the deficiency period that is the subject of the Audit Determination Letter and Notice of Violation, in violation of CCMC sections 3-2.8.070, 3-2.8.080, and 3-2.8.060.

Though the burden of proof is not expressly stated in the City’s ordinance, the preponderance of the evidence standard generally applies to all administrative matters unless another higher degree of proof is imposed by statute. The preponderance-of-the-evidence standard requires that City staff must persuade City Council that, by the evidence presented in this Staff Report and any evidence presented at the hearing, that what City staff is required to prove is more likely to be true than not true.

This is a relatively low standard that the City has met with respect to the tax determination as shown above. The City physically inspected the Property, measured the square footage, observed the applicably canopy type and lighting type, and followed the proper noticing procedure for determining and attempting to collect the unpaid/deficient taxes owed to the City.

FISCAL IMPACT
None.

ENVIRONMENTAL IMPACT
None. This proceeding constitutes regulatory activity exempt from CEQA.7

RECOMMENDATION
Staff recommends that City Council uphold the Notice of Violation in its entirety, deny the appeal, and adopt the proposed resolution as presented.

ATTACHMENTS
Attachment No. 1 - Commercial Cannabis Inspection Form
Attachment No. 2 - Audit Determination Letter
Attachment No. 3 - Notice of Violation
Attachment No. 4 - Notice of Appeal
Attachment No. 5 - Applicable CCMC Provisions
Attachment No. 6 - Proposed Resolution
7 See 14 Cal. Code Regs., § 15321(a).

ATTACHMENT 1
CANNABIS FACILITY SITE INSPECTION-TO SATISFY ANNUAL AUDIT REQUIREMENT _PER MUNICIPAL CODE Sec. 5-6.1405. - Inspection and Enforcement

# co Y - 0004046

Completed by Contracted Service Provider, Core Compliance tre” = comune ATTACHMENT 2

CITY HALL
21000 Hacienda Blvd.

California City, CA 93505
______________________________________
760-373-8661
www.californiacity-ca.gov
Kelly Kulikoff
MAYOR
Ronald Smith

MAYOR PRO TEM
Jim Creighton
Karen Macedonio
Michael Kulikoff

COUNCIL MEMBERS
__________________
Dr. Jim Hart

INTERIM CITY MANAGER
August 3, 2023
Herbs Cali Krush LLC (Cultivation)
22495 Jamison St
California City, CA 93505
SUBJECT: 2023 COMMERCIAL CANNABIS COMPLIANCE AUDIT

DETERMINATION
Dear Herbert Gonzalez,
Thank you for your time and cooperation as part of the 2023 annual compliance assessment and audit for your commercial cannabis operations in California City. In accordance with the Municipal Code, we have completed our assessment and would like to deliver the following findings to you:

PURPOSE
The purpose of the audit is to ensure all commercial cannabis operators in the City of California City are operating in compliance with local and state regulations. This is to ensure public safety and equity at all levels of activities within the City.

PROCEDURES
Core Compliance staff who have been contracted by the City conducted an audit. An audit survey was emailed to you with a request to upload the businesses books and records. We received :
● State of California Cannabis License
● City of California City Cannabis Business Permit
● State Tax Returns
● Sales & Use Tax Return for 2nd quarter 2023

RESULTS
After a thorough review of the records provided, inspection assessment, and a reconciliation of City and State records, it has been determined that the following needs to be corrected within 30 days of the date of this letter:

1. Remit payment in the amount of $82,384.72 for unpaid excise taxes (note this amount includes penalty and interest(.

2. Obtain a city business license.

3. Renew city permit.

You may reach out to City Finance Manager at [email protected] to make arrangements for payment.

CONCLUSIONS
Please contact [email protected] with any questions regarding the contents of this letter. If the issues listed above are unresolved by September 2, 2023, your facility will be red tagged by compliance staff and any existing licenses will be recommended for revocation immediately.

Thank you in advance for your cooperation.

Sincerely,
Jaimie Lewis
Cannabis Compliance Unit
Core Compliance on behalf of California City
CC: Finance Manager
City Manager
City Clerk
City of California City Cannabis Compliance Audit Working Papers 1 Business information last updated 8/3/23
Date: 8/2/23
Auditor: Tim Benner
Business Name: Herbs Cali Krush LLC
Audit Period Q3 2020 - Q2 2023
Local Permit#: 20230109 Operation Type: Cultivation
Local Permit Expiration Date: 6/30/23
State License #: CCL19-0003035 1/6/20
State License Expiration Date: 1/6/24
Business Address: 22495 Jamison St California City, CA 93505 Mailing Address (if different)
Tax Liability Yes
Amount due: $ 82,384.72 $ 34,206.52
Needs to Obtain Permit Yes
Needs to obtain Business License Yes
Audit Findings Summary:

Site Visit Date: 4/15/23
Verified square footage : 0 natural light
2,294.2 artifical light
$ 82,384.72
Confirmed Start Date
Total Penalty & Interest included in amount
Taxes due based on 2,294.2 cultivation artificial light square footage. Square foot amounts obtained during inspection. Taxes due based on 1/6/20 start date which is date of issuance for state license.

State license active. No record of city business license, needs to obtain. Local permit Expired 6/30/23.

Needs to renew if not done already.

Total Amount Payable to the City of
CA City before due date
1 Cultivation last updated 8/3/23
Cultivation Square Footage Analysis
Business Name: Herbs Cali Krush LLC LIGHTING TYPE ARTIFICIAL 2294.2 Audit Period Q3 2020 - Q2 2023 LIGHTING TYPE NATURAL
City Fiscal Quarter CDTFA Tax Quarter SQFT Quarterly Tx Rate Tax Due Taxes Paid Difference 4Q20 2Q20 0 $ 0.25 $ - $ - $ -
1Q21 3Q20 0 $ 0.25 $ - $ - $ -
2Q21 4Q20 0 $ 0.25 $ - $ -
3Q21 1Q21 0 $ 0.25 $ - $ -
4Q21 2Q21 0 $ 0.25 $ - $ -
1Q22 3Q21 0 $ 0.25 $ - $ -
2Q22 4Q21 0 $ 0.25 $ - $ -
3Q22 1Q22 0 $ 0.25 $ - $ -
4Q22 2Q22 0 $ 0.25 $ - $ -
1Q23 3Q22 0 $ 0.25 $ - $ -
2Q23 4Q22 0 $ 0.25 $ - $ -
3Q23 1Q23 0 $ 0.25 $ - $ -
$ - $ - $ -
City Fiscal Quarter CDTFA Tax Quarter SQFT Quarterly Tx Rate Tax Due Taxes Paid Difference 4Q20 2Q20 2294.2 $ 1.75 $ 4,014.85 $ - $ 4,014.85
1Q21 3Q20 2294.2 $ 1.75 $ 4,014.85 $ - $ 4,014.85
2Q21 4Q20 2294.2 $ 1.75 $ 4,014.85 $ - $ 4,014.85
3Q21 1Q21 2294.2 $ 1.75 $ 4,014.85 $ - $ 4,014.85
4Q21 2Q21 2294.2 $ 1.75 $ 4,014.85 $ - $ 4,014.85
1Q22 3Q21 2294.2 $ 1.75 $ 4,014.85 $ - $ 4,014.85
2Q22 4Q21 2294.2 $ 1.75 $ 4,014.85 $ - $ 4,014.85
3Q22 1Q22 2294.2 $ 1.75 $ 4,014.85 $ - $ 4,014.85
4Q22 2Q22 2294.2 $ 1.75 $ 4,014.85 $ - $ 4,014.85
1Q23 3Q22 2294.2 $ 1.75 $ 4,014.85 $ - $ 4,014.85
2Q23 4Q22 2294.2 $ 1.75 $ 4,014.85 $ 4,014.85
3Q23 1Q23 2294.2 $ 1.75 $ 4,014.85 $ - $ 4,014.85
$ 48,178.20 $ - $ 48,178.20
Auditor notes: Sq Ft. amount obtained from
inspection. No payment amounts noted.

Start date noted as date of state license
issuance.

Cannabis Tax Audit Working Papers
Penalty Calculation
Business Name: Herbs Cali Krush LLC
Audit Period Q3 2020 - Q2 2023
Penalty and Interest Rate Tax Due Penalty & Interest
Penalty 1. < Month -10% 10% $ 48,178.20 $4,817.82
Penalty 2. > Month - 25% 25% $ 48,178.20 $12,044.55
Interest 1% per month 1% $ 48,178.20 $17,344.15
total P&I $34,206.52
Confirmed start Date 1/6/20
Months Calculation audit period 36
Liability Determination
ATTACHMENT 3

NOTICE OF VIOLATION
NOTICE IS HEREBY GIVEN pursuant to Title 3, Chapter 2, Article 8 (Cannabis Business Tax) of the

California City Municipal Code (“CCMC”) that violations exist for the licensee identified below.

Name of Licensee: Herbs Cali Krush, LLC.

Point of Contact: Herbert Hernandez
Address of Subject Property: 22495 Jamison Street, California City, CA 93505 Assessors’ Parcel Number (APN): 302-062-24
Local Permit No.: 20230109
Local Permit Type: Cultivation
State Permit No. CCL19-0003035
State Permit Type: Cultivation- Small Indoor
Business License No.

Code Violations : Sec 3-2.8.070, Sec. 3-2.8.080

Date : June 10, 2024
To: Herbert Hernandez, bl
On June 1, 2024, Inge Elmes, the Tax Administrator reviewed the information provided by Herbs Cali Krush, LLC., regarding its cannabis business tax requirements and observed that you are in violation of Title 3, Chapter 2, Article 8 (Cannabis Business Tax) of the CCMC. You are receiving this Notice of Violation as a courtesy under CCMC Sec. 3-2.8.090 (Notice is not Required by the City) which states that “the city may as a courtesy send a tax notice to the business. However, the Tax Administrator is not required to send a delinquency or other notice or bill to any person subject to the provisions of this article.”

CODE SECTIONS VIOLATED
The Tax Administrator has concluded that Herbs Cali Krush, LLC., is in violation of the following codes and/or sections of the CCMC: (For the full text of the CCMC see

https: //library.municode.com/ca/california_city/codes/code_of ordinances?nodeld=15428).

Sec. 3-2.8.060(a)-(c). - Reporting and Remittance of Tax. (a) The cannabis business tax imposed by this article shall be paid, in arrears, on a quarterly basis. For commercial cannabis cultivation, the tax due for each calendar quarter shall be based on the square footage of the business's canopy space during the quarter and the rate shall be 25% of the applicable annual rate. For all other cannabis businesses activities, the tax due for each calendar quarter shall be based on the gross receipts for the quarter.

1 (b) Each person owing cannabis business tax for a calendar quarter shall, no later than the last day of the month following the close of the calendar quarter, file with the Tax Administrator a statement of the tax owed for that calendar quarter and the basis for calculating that tax. The Tax Administrator may require that the statement be submitted on a form prescribed by the Tax Administrator. The tax for each calendar quarter shall be due and payable on that same date as the statement for the calendar quarter is due. (c) Upon cessation of a cannabis business, tax statements and payments shall be immediately due for all calendar quarters up to the calendar quarter during which * cessation occurred.

Sec. 3-2.8.070. - Payments and Communications—Timely Remittance, Whenever any payment, statement, report, request, or other communication is due, it must be received by the Tax Administrator on or before the final due date. A postmark will not be accepted as timely remittance. If the due date would fall on a Saturday, Sunday or a holiday, the due date shall be the next regular business day on which the City is open to the public.

Sec. 3-2.8.080. - Payment—When Taxes Deemed Delinquent. Unless otherwise specifically provided under other provisions of this article, the taxes required to be paid pursuant to this article shall be deemed delinquent if not received by the Tax

Administrator on or before the due date as specified in Sections 3-2.8.060 and 3-2.8.070.

DESCRIPTION OF VIOLATIONS
On June 1, 2024, the Tax Administrator determined that Herbs Cali Krush, LLC., is in violation of Sec.

3.2.8.070 and Sec. 3-2.8.080 for failure to remit accurate quarterly cannabis tax statements and failure to remit accurate quarterly cannabis taxes.

REQUIRED ACTIONS AND TIMELINES TO CORRECT VIOLATIONS
$
Please remit all back taxes due within fifteen (15) regular days ending on June 25, 2024, by end of business day.

Sec. 3-2.8.100. - Penalties and Interest.
(a) Any person who fails or refuses to pay any cannabis business tax required to be paid pursuant to this article on or before the due date shall pay penalties and interest as follows:

1. A penalty equal to 10% of the amount of the tax, in addition to the amount of the tax, plus interest on the unpaid tax calculated from the due date of the tax at the rate of 1.0% per month.

3. Interest shall be applied at the rate of 1.0% per month on the first day of the month for the full month and will cóntinue to accrue monthly on the tax and penalty until the balance is paid in full. (b) Whenever a check or electronic payment is submitted in payment of a cannabis business tax and the payment is subsequently returned unpaid by the bank for any reason, the taxpayer will be liable for the tax amount due plus any fees, penalties, and interest as provided for in this section, and any other amount allowed under state law. om

INCREASING PENALTIES AND INTEREST
As noted above, your cannabis business unpaid taxes were due on September 2, 2023, in the amount of $82,384.72, including penalties and interest, based on the audit determination letter dated August 3, 2023. Each and every day you fail to pay the cannabis business taxes you owe the city; the city will levy additional penalties and interest against Herbs Cali Krush, LLC., in line with CCMC Sec. 3-2.8.100.

APPEAL
Within thirty (30) calendar days from June 10, 2024, you may appeal any decision of the Tax Administrator to the City Council pursuant to Section 3-2.8.150 (Appeal Procedure) of the California City Municipal Code. The entirety of Section 3-2.8.150 is produced below.

Sec. 3-2.8.150. - Appeal Procedure. Any taxpayer aggrieved by any decision of the Tax Administrator with respect to the amount of tax, interest, penalties, and fees, if any, due under this article may appeal to the City Council by filing a notice of appeal with the City Clerk within thirty (30) days of the serving or mailing of the determination of tax due. The City Clerk shall fix a time and place for hearing such appeal, and the City Clerk shall give notice in writing to such operator at the last known place of address. The finding of the City Council shall be final and conclusive and shall be served upon the appellant in the manner prescribed by this article for service of notice of hearing. Any amount found to be due shall be immediately due and payable upon the service of the notice.

ENFORCEMENT
The City of California City may take any and all remedial action authorized by law to enforce this Notice of Violation, including but not limited to the following authorized by Title 3, Chapter 2, Article 8 of the CCMC:
s

1. The Tax Administrator may revoke or refuse to renew cannabis business permit #20230109 because of your delinquency in paying the cannabis business tax (CCMC 3-§ 2.8.200(c)).

2. Criminal, civil, and equitable actions, based upon the failure to pay the tax, penalties and/or fees imposed by this article or the failure to comply with any of the provisions of this article. (CCMC § 3-2.8.160).

3. Assessments against Herbs Cali Krush, LLC., (CCMC $8 3-2.8.230-250).

The city wishes to thank you in advance for your timely cooperation in this matter. If you have any questions, please call me at 760-338-1080 or email me at [email protected]. To ensure prompt service, please bring this letter with you when you come to the Finance Department.

Sincerely,

Inge Elthes, Cannabis Tax Administrator
Attachments
e Audit Determination Letter by Core Compliance dated August 3, 2023. e Copies of calculations to determine back taxes owed dated August 2, 2023. e Copy of emails between Herbert Gonzalez and City of California City dated August 28, 2023 - September 18, 2023.

CITY HALL Kelly Kulikoff

YOR 21000 Hacienda Blvd. se bs California City, CA 93505 Ronald Smit MAYOR PRO TEM - 760-373-8661 Jim Creighton
www.californiacity-ca.gov Karen Macedonio
Michael Kulikoff

COUNCIL MEMBERS

Dr. Jim Hart

INTERIM CITY MANAGER

August 3, 2023
Herbs Cali Krush LLC
22495 Jamison St
California City, CA 93505
SUBJECT: 2023 COMMERCIAL CANNABIS COMPLIANCE AUDIT

PROCEDURES
Core Compliance staff who have been contracted by the City conducted an audit. An audit survey was emailed to you with a request to upload the businesses books and records. We received :

State of California Cannabis License
City of California City Cannabis Business Permit
State Tax Returns
Sales & Use Tax Return for 2nd quarter 2023

1. Remit payment in the amount of $82,384.72 for unpaid excise taxes (note this amount includes penalty and interest(.

2. Obtain a city business license.

3. Renew city permit.

You may reach out to City Finance Manager at kcooper(wcaliforniacity-ca.gov to make arrangements for payment.

Thank you in advance for your cooperation.

Sincergly,
Jaimie Lewis
Cannabis Compliance Unit
Core Compliance on behalf of California City
CC: Finance Manager
City Manager
City Clerk
Business Name:

Audit Period
Local Permit#:

Local Permit Expiration Date:

State License #:

State License Expiration Date:

Business Address:

Mailing Address (if different)
Tax Liability
Amount due:

Needs to Obtain Permit
Needs to obtain Business License
Audit Findings Summary:

Site Visit Date:

Verified square footage :

Total Amount Payable to the City of >
CA City before due date
City of California City Cannabis Compliance Audit Working Papers

Date: 8/2/23
Auditor: Tim Benner
Herbs Cali Krush LLC
Q3 2020 -Q2 2023
20230109 Operation Type: Cultivation
6/30/23
CCL19-0003035 Confirmed Start Date 1/6/20
1/6/24
22495 Jamison St California City, CA93505
Yes
| S 82,384.72 | Total Penalty & Interest includedinamount S 34,206.52 Yes
Yes
Taxes due based on 2,294.2 cultivation artificial light square footage. Square foot amounts obtained duringinspection. Taxes due based on 1/6/20 start date which is date ofissuance for state license.

State license active. No record of city business license, needs to obtain. Local permit Expired 6/30/23.

Needsto renew ifnot done already.
4/15/23
O natural light
2,294.2 artifical light
82,384.72
Business information last updated 8/3/23
City Fiscal Quarter
4Q20
1021
2021
3021
4Q21
1022
2022
3022
4022
1023
2023
3023
City Fiscal Quarter
4020
1021
2021
3021
4Q21
1022
2022
3022
4022
1023
2023
3023
Cultivation Square Footage Analysis
Business Name: Herbs Cali Krush LLC
Audit Period Q3 2020 -Q2 2023
CDTFA Tax Quarter SQFT Quarterly Tx Rate
2020 os 0.25
3Q20 os 0.25
4020 0 $ 0.25
1Q21 0 $ 0.25
2Q21 0 5$ 0.25
3Q21 os 0.25
4Q21 0o$ 0.25
1Q22 0 $ 0.25
2Q22 os 0.25
3Q22 0$ 0.25
4022 0$ 0.25
1023 os 0.25
CDTFA Tax Quarter SQFT Quarterly Tx Rate
2020 2294.2 $ 1.75
3020 2294.2 $ 1.75
4Q20 2294.2 $ 1.75
1021 2294.2 $ 1.75
2021 2294.2 $ 1.75
3Q21 2294.2 $ 1:35
4021 2294.2 $ 1.75
1022 2294.2 $ 1.75
2022 2294.2 $ 1.75
3022 2294.2 $ 1.75
4022 2294.2 $ 1.75
1023 2294.2 $ 1.75

LIGHTING TYPE ARTIFICIAL 2294.2

LIGHTING TYPE NATURAL
Tax Due Taxes Paid Difference
$ $ $ -
$ $ $ -
$ - $ -
$ $ -
$ $
$ - $
$ - $ =
$ E $ :
$ - $ -
$ $ -
$ $ -
$ - $ a
$ 55 $ E
Tax Due Taxes Paid Difference
$ 4,014.85 $ 4,014.85
$ 4,014.85 $ $ 4,014.85
$ 4,014.85 $ $ 4,014.85
$ 4,014.85 $ $ 4,014.85
$ 4,014.85 $ $ 4,014.85
$ 4,014.85 $ $ 4,014.85
$ 4,014.85 $ $ 4,014.85
$ 4,014.85 $ $ 4,014.85
$ 4,014.85 $ $ 4,014.85
$ 4,014.85 $ $ 4,014.85
$ 4,014.85 $ 4,014.85
$ 4,014.85 $ S 4,014.85
$ 48,178.20 _$ 5 48,178.20
&
Cultivation
Auditor notes: Sq Ft. amount obtained from
inspection. No payment amounts noted.

Start date noted as date of state license
issuance.
last updated 8/3/23
Business Name:

Audit Period
Penalty and Interest
Penalty 1. < Month -10%
Penalty 2. > Month - 25%
Interest 1% per month
Confirmed start Date
Months Calculation
Cannabis Tax Audit Working Papers
Liability Determination
Herbs Cali Krush LLC
Q3 2020 -Q2 2023
Rate
audit period
Tax Due Penalty & Interest
10% $ 48,178.20 $4,817.82
25% S 48,178.20 $12,044.55
1% $ 48,178.20 $17,344.15
total P&| $34,206.52
1/6/20
36 Penalty Calculation

Inge
From:

Elmes
==
Cannabis Compliance

DS AS A
Sent: Monday, August 28, 2023 3:40 PM
To: Herbert Gonzalez
Subject: Re: HerbsCaliKrushLLC
Yes this is for cultivation taxes due. You will need to work with the City Finance department to resolve.

Jaimie Lewis, MPA
Cannabis Compliance Section
Phone: (760)338-8010
cannabiscompliance @californiacity-ca.gov

www.californiacity-ca.gov
From: Herbert Gonzalez <[email protected]> Date: Monday, August 28, 2023 at 1:15 PM
To: Cannabis Compliance <[email protected]>

Subject: Re: HerbsCaliKrushLLC

EXTERNAL MESSAGE: Use caution when clicking links or attachments The excise tax $85,000 donibhave to pay this? :

Herbert Gonzalez
Business Development Representative, United States
Pure Life Carbon Inc.

Alberta, Canada

Jaimie Lewis, MPA
Cannabis Compliance Section
Phone: (760)338-8010
cannabiscompliance @californiacity-ca.gov

www.californiacity-ca.gov
From: Herbert Gonzalez <[email protected]> Date: Monday, August 28, 2023 at 12:41 PM
To: Cannabis Compliance <[email protected]>, Tim Benner <[email protected]>, [email protected] <[email protected]>, [email protected] <[email protected]>, City Manager <citymanager@californiacityca.gov>, City Clerk <[email protected]>, Jesse Hightower <[email protected]>, Jeremy Kosick <[email protected]>, Kenny Cooper <[email protected]>, Jaimie Lewis <[email protected]>

Subject: Re: HerbsCaliKrushLLC ;

EXTERNAL MESSAGE: Use caution when clicking links or attachments So, | don’t have to pay anything correct???
Herbert Gonzalez
Business Development Representative, United States
Pure Life Carbon Inc.

Alberta, Canada

[email protected]
T +1 (587) 797-4000 | M +1 (310) 497-5057 | purelifecarbon.com From: Cannabis Compliance <cannabiscompliance @californiacity-ca.gov> Sent: Monday, August 28, 2023 12:39:32 PM
To: Herbert Gonzalez <[email protected]>; Tim Benner <[email protected]>; herbgonzalez323 @gmail.com <herbgonzalez323 @gmail.com>; [email protected] <[email protected]>; City Manager <[email protected]>; City Clerk <[email protected]>; Jesse Hightower <jhightower @californiacitypd.org>; Jeremy Kosick 2 <[email protected]>; Kenny Cooper <[email protected]>; Jaimie Lewis <[email protected]> Subject: Re: HerbsCaliKrushLLC
Hello Mr. Gonzalez,
The audit determination was for your cultivation entity. We have determined the audit for manufacturing to be not warranted as what you’ve stated is correct. Our inspectors agree that no manufacturing was active and thus the audit has been waived. Please let me know if you have any questions about the cultivation audit liability that has been determined.

Thanks,

Jaimie Lewis, MPA
Cannabis Compliance Section
Phone: (760)338-8010
cannabiscompliance @californiacity-ca.gov

www,.californiacity-ca.gov
From: Herbert Gonzalez <[email protected]> Date: Monday, August 28, 2023 at 9:00 AM
To: Tim Benner <[email protected]>, Cannabis Compliance <[email protected]>, herbgonzalez3230 gmail.com <herbgonzalez323(W gmail.com>, Nolan.AveryOcannabis.ca.gov <Nolan.AveryOcannabis.ca.gov>

Subject: HerbsCaliKrushLLC
EXTERNAL MESSAGE: Use caution when clicking links or attachments Good morning £3
| was inspected by the DCC manufacturing division.

They saw that | have zero equipment
No sings of ever operating or having activity
And still building out the facility

THERE IS NO POWER ZERO ELECTRICITY AVAILABLE AND THE CITY PROMISED IT | don't even have the electric capability pr capacity to operate everything even if | wanted Hello ES)
The fire department has also come by multiple times this year The code inspectors have also come by many times this year Far more times than | can remember, and | had to fix many issues with them The fire lane
Clean up the yard
Remove my Rv
No dogs
Etc
No daisy chains electric connections so | added power outlets | already fix everything
l am a one-man show
A SocialEquityCompany
| have a job with PureLifeCarbonInc because it's almost impossible to get up running with so many inspectors coming by | just paid $10,000 to the city for my cultivation permit Then immediately after | was hit with these excise tax fees And | am yet to make a dime or grow a pound!!!
The prices of cannabis are extremely low most companies are going out of business due to all the taxation penalties fees etc
| have sent you too much information videos proving my case and last | spoke to you You said you would look over the information and get. Back to me Thank you ©
Herbert Gonzalez
Business Development Representative, United States
Pure Life Carbon Inc.

Alberta, Canada

[email protected] ‘
T+1 (587) 797-4000 | M +1 (310) 497-5057 | purelifecarbon.com ATTACHMENT 4
Notice of Appeal
Notice is hereby given as outlined in Article 6 of the California City Municipal Code. Sec. 5-6.602 – Written request for Appeal
I will be appealing the following: Sec 3-2.8.070, Sec. 3-2.8.080, Sec. 3-2.8.060(a)-(c) Name of Licensee: Herbs Cali Krush LLC
Point of Contact: Herbert Gonzalez
Address of Subject Property: 22495 Jamison Street, California City, Ca 93505 Assessors Parcel Number: (APN): 302-062-24
Local Permit No.:20230109
Local Permit Type: Cultivation
State Permit No. CCL19-0003035
State Permit Type: Cultivation-Small Indoor
This is the written request for an appeal.

I will be paying the filing fee of $85 to the city clerk today Sincerely,
-------------------------
Herbert Gonzalez, Owner
ATTACHMENT 5
California City, CA Code of Ordinances about:blank
ARTICLE 8. - CANNABIS BUSINESS TAX
Sec. 3-2.8.010. - Title.

This article shall be known as the Cannabis Business Tax. (Ord. No, 17-748, 8 1, 6-6-2017)
Sec. 3-2.8.020. - Authority and Purpose.

The Cannabis Business Tax is a general tax enacted solely for general governmental purposes of the City and not for specific purposes. All of the proceeds from the tax imposed by this article shall be placed in the City's general fund and be available for any legal municipal purpose. (Ord. No. 17-748, 8 1, 6-6-2017)
Sec. 3-2.8.030. - Intent.

The following words and phrases shall have the meanings set forth below when used in this article:
(a) "Business" shall include all activities engaged in or caused to be engaged in within the City, including any commercial or industrial enterprise, trade, profession, occupation, vocation, calling, or livelihood, whether or not carried on for gain or profit, but shall not include the services rendered by an employee to his or her employer. (b) "Cannabis" means all parts of the plant Cannabis sativa Linnaeus, Cannabis indica, or Cannabis ruderalis, whether growing or not; the seeds thereof; the resin, whether crude or purified, extracted from any part of the plant; and every compound, manufacture, salt, 1of 15 9/17/2024, 11:50 AM
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1 of 15 9/17/2024, 11:50 AM
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derivative, mixture, or preparation of the plant, its seeds, or resin. "Cannabis" also means the separated resin, whether crude or purified, obtained from cannabis. "Cannabis" also means marijuana as defined by Section 11018 of the California Health and Safety Code and is not limited to medical cannabis.
(c) "Cannabis product" means raw cannabis that has undergone a process whereby the raw agricultural product has been transformed into a concentrate, an edible product, ora topical product. "Cannabis product" also means marijuana products as defined by Section 11018.1 of the California Health and Safety Code and is not limited to medical cannabis products.
(d) "Canopy" means all areas occupied by any portion of a cannabis plant whether contiguous or noncontiguous on any one site. When plants occupy multiple horizontal planes (as when plants are placed on shelving above other plants) each plane shall be counted as a separate canopy area.
(e) "Cannabis business" means any business activity involving cannabis, including but not limited to cultivating, transporting, distributing, manufacturing, compounding, converting, processing, preparing, storing, packaging, delivering, testing, dispensing, retailing and wholesaling of cannabis, of cannabis products or of ancillary products and accessories, whether or not carried on for gain or profit.
(f) "Cannabis business tax" or "business tax," means the tax due pursuant to this article for engaging in cannabis business in the City.
(g) "Commercial cannabis cultivation" means cultivation in the course of conducting a cannabis business.
(h) "City permit" means a permit issued by the City to a person to authorize that person to operate or engage in a cannabis business.
(i) "Cultivation" means any activity involving the planting, growing, harvesting, drying, curing, grading, or trimming of cannabis and includes, but is not limited to, the operation of a nursery.
(j) "Distribution" shall have the same definition as set forth in California Business and Professions Code 8 26001, as may be amended from time to time. (k) "Distributor" shall mean persons engaging in Distribution. (I) "Employee" means each and every person engaged in the operation or conduct of any business, whether as owner, member of the owner's family, partner, associate, agent, manager or solicitor, and each and every other person employed or working in such business for a wage, salary, commission, barter or any other form of compensation. (m) "Engaged in business as a cannabis business" means the commencing, conducting, 9/17/2024, 11:50 AM
California City, CA Code of Ordinances about:blank
2 of 15 9/17/2024, 11:50 AM
California City, CA Code of Ordinances
3 of 15
operating, managing or carrying on of a cannabis business, whether done as owner, or by means of an officer, agent, manager, employee, or otherwise, whether operating from a fixed location in the City or coming into the City from an outside location to engage in such activities. A person shall be deemed engaged in business within the City if:

1. Such person or person's employee maintains a fixed place of business within the City for the benefit or partial benefit of such person;

2. Such person or person's employee owns or leases real property within the City for business purposes;

3. Such person or person's employee regularly maintains a stock of tangible personal property in the City for sale in the ordinary course of business;

4. Such person or person's employee regularly conducts solicitation of business within the City; or

5. Such person or person's employee performs work or renders services in the City.

The foregoing specified activities shall not be a limitation on the meaning of "engaged in business."
(n)
(o)
(p)
"Evidence of doing business" means evidence such as, without limitation, use of signs, circulars, cards or any other advertising media, including the use of internet or telephone solicitation, or representation to a government agency or to the public that such person is engaged in a cannabis business in the City.
"Fiscal year" means July 1 through June 30 of the following calendar year. "Gross receipts," except as otherwise specifically provided, means, whether designated a sales price, royalty, rent, commission, dividend, or other designation, the total amount (including all receipts, cash, credits and property of any kind or nature) received or payable for sales of goods, wares or merchandise or for the performance of any act or service of any nature for which a charge is made or credit allowed (whether such service, act or employment is done as part of or in connection with the sale of goods, wares, merchandise or not), without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, interest paid or payable, losses or any other expense whatsoever. However, the following shall be excluded from gross recejpts:

1. Cash discounts where allowed and taken on sales;

2. Any tax required by law to be included in or added to the purchase price and collected from the consumer or purchaser;

3. Such part of the sale price of any property returned by purchasers to the seller as about:blank
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California City, CA Code of Ordinances about:blank
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ATTACHMENT 6

4894-8760-5478 v1
RESOLUTION NO. 2024-_____

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

CALIFORNIA CITY, CALIFORNIA, DENYING APPEAL OF
HERBS CALI KRUSH, INC. AND UPHOLDING NOTICE OF

VIOLATION

WHEREAS, on January 6, 2020, Herbs Cali Krush, Inc. commenced commercial cannabis activity in the City; and
WHEREAS, on April 15, 2023, City staff audited/inspected the real property located at 22495 Jamison Street with the consent of Herbs Cali Krush, whereat City inspectors observed 2,294.2 square feet of artificial light cultivation canopy; and WHEREAS, following conclusion of the audit/inspection, a deficiency determination was made under Section 3-2.8.220; and
WHEREAS, on August 3, 2023, the City issued a letter providing notice of the deficiency determination to Herbs Cali Krush in a letter titled 2023 Commercial Cannabis Compliance Audit Determination (“Audit Determination Letter”), requiring the following amounts to be paid within 30 days: $82,384.72 in unpaid taxes, penalties, and interest (based on 2,294.2 square feet, at a rate of $7 per square foot, for the prior 36 months, for a total base tax of $48,178.20 owed, plus penalties and interest in the amount of $34,206.52); and
WHEREAS, on June 10, 2024, the City issued a Notice of Violation to Herbs Cali Krush that, among other things, demanded payment of the deficiency amount of $82,384.72 and alleged violations of CCMC sections 3-2.8.070, 3-2.8.080, and 3-

2.8.060(a)-(c); and
WHEREAS, on June 17, 2024, the Herbs Cali Krush filed a timely appeal within the prescribed 30-day appeal period; and
WHEREAS, on September 24, 2024, a public hearing was held before the California City City Council on said appeal, at which time all interested persons were given full opportunity to be heard and to present evidence.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF CALIFORNIA CITY, CALIFORNIA, HEREBY RESOLVES AS FOLLOWS:

SECTION 1. The facts set forth above are true and correct and are incorporated herein by reference.

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SECTION 2. Based on the preponderance of the evidence presented to this City Council at the above-referenced public hearing on October 24, 2024, including factual information submitted by the Cannabis Tax Administrator in the staff report and administrative appeal brief and attachments dated October 24, 2024, and all related information presented to the City Council, this City Council finds and determines that the June 10, 2024 Notice of Violation is upheld and the appeal is denied for the following reasons:

1. Herbs Cali Krush has engaged in cannabis cultivation in the City since January 6, 2020.

2. The City properly completed an audit of Herbs Cali Krush according to Section 3-2.8.190 showing 2,294.2 square feet of artificial light cultivation canopy.

3. For a period of time from the third fiscal quarter of 2020 to the second fiscal quarter of 2023, Herbs Cali Krush has failed to pay to the Tax Administrator any taxes, penalties, or interest owed under Title 3, Chapter 2, Article 8 of the California City Municipal Code.

4. For a period of time from the third quarter of 2020 to the second quarter of 2023, Herbs Cali Krush has failed to file with the Tax Administrator any statement of the tax owed.

5. The City properly issued Herbs Cali Krush the Notice of Violation, which properly determined that Herbs Cali Krush owed $82,384.72 in unpaid taxes, penalties, and interest, based on 2,294.2 square feet of artificial light canopy, at a rate of $7 per square foot annually, for a period of time from the third quarter of 2020 to the second quarter of 2023.

6. Herbs Cali Krush has failed to present sufficient evidence or legal argument establishing any entitlement to relief. Throughout these proceedings, Herbs Cali Krush has not demonstrated that the City’s actions were improper, unlawful, or contrary to any applicable legal standards. The record reflects that the City acted within its lawful authority, adhering to all relevant statutory and procedural requirements. Herbs Cali Krush’s appeal is without merit, and no valid grounds have been provided that would warrant overturning or modifying the determinations within the Notice of Violation.

SECTION 3. For the foregoing reasons, the City Council determines that the June 10, 2024 Notice of Violation is upheld as proper in all respects and the appeal is denied. Herbs Cali Krush owes $82,384.72 in taxes, penalties, and interest related to cannabis cultivation in the City.

SECTION 4. The City Clerk shall certify to the adoption of this Resolution.

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PASSED, ADOPTED, AND APPROVED by the City Council of the City of California, California, at a regular meeting thereof this 24th day of October, 2024 by the following vote to wit:

AYES:

NAYS:

ABSTAIN:

ABSENT:

APPROVED:
____________________________________
Kelly Kulikoff,
Mayor of the City of California City, California
ATTEST:
__________________________________
Leanndrea Weible,
Deputy City Clerk of the City of California City, California

California City City CouncilOctober 28, 2024

California City City Council
October 28, 2024