POTENTIAL COMMERCIAL
CANNABIS TAX MEASURE
Dean Derleth, City Attorney
City Council Meeting – July 6, 2022
Tonight’s Ask?
2 What tax rates should be included in a
commercial cannabis tax measure to be
placed on the November 8, 2022 ballot?
Study Session Direction
3 Council directed staff to prepare the
necessary documents for the City
Council’s consideration to place a
commercial cannabis tax measure on
the November 8, 2022 ballot.
You have all of the necessary
documents in tonight’s agenda
packet.
Tonight’s Documents
4 Reso 2022-102
Calls for Placement of Measure; Includes Ordinance
Revenue Estimate = $5M (Finance Dept & HdL)
Reso 2022-103
Requests Consolidation of Elections
Reso 2022-104
Sets Deadlines & Rules for Arguments
Ordinance Text
5 Maximum tax rate set at the same percentage as the
current operating fee range.
Includes a “catch-all” max rate of 15% for all other
legal cannabis businesses (e.g. those you choose to
regulate in the future), as well as for illegal cannabis businesses (a.k.a. deterrent)
Ordinance Text
6 Council has authority to upwardly or downwardly
adjust the tax rates within these ranges, as well as to repeal, suspend, or amend the ordinance. Other
substantive changes, such as rate or methodology,
would require a vote of the people.
If the ordinance passes, the fee would be contractually eliminated (stated in Resolution).
Current Operating Fees
Authorized Fee Range
Retailers 0 - 9%
Manufacturing/Distribution 0 - 7%
Testing 0 - 3%
Initial Operating Fee
Retailers 7%
Manufacturing/Distribution 5%
Testing 2%
7 County Averages
8 COUNTY AVERAGE RATES
BUSINESS TYPE MAX RANGE CURRENT RATE
Retail 12% 10%
Manufacturing 11% 8%
Distribution 11.6% 7.4%
Testing 12% 8%
Alternatives?
9 Discussion Arose at Study Session
Potential Policy Reasons
Over taxation argument
More competitive business structure within region
Location of more tax sensitive business types (e.g. distribution) Location of higher paying jobs (e.g. laboratories)
Alternative 1
10 MAX AT CURRENT CITY FEE
BUSINESS TYPE CURRENT MAX ALT MAX
Retail 9% 7%
Manufacturing 7% 5%
Distribution 7% 5%
Testing 3% 2%
Alternative 2
11 DISTRIBUTION & LAB – MAX AT 2%
BUSINESS TYPE CURRENT MAX ALT MAX
Retail 9% 7%
Manufacturing 7% 5%
Distribution 7% 2%
Testing 3% 2%
Alternative 3
12 DISTRIBUTION & LAB – NO TAX
BUSINESS TYPE CURRENT MAX ALT MAX
Retail 9% 7%
Manufacturing 7% 5%
Distribution 7% 0%
Testing 3% 0%
Other Alternatives?
13 Next Steps
Send to County
Impartial Analysis & Arguments Submitted
Tax measure appears on 11-08-22 ballot
If approved by majority of voters, tax ordinance
becomes effective 10 days after certification of
election results
14 Direction Sought
Move Forward?
Proposed Tax Rate?
15 Questions?
(951) 279-3525
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www.CoronaCA.gov