AMENDMENT TO COMMERCIAL CANNABIS TAXATION RATES
Megan Hunter, Community Development Director &
Courtney Grossman, Planning Manager
City Council
October 18, 2022
Background
February 15th – Annual report on commercial cannabis industry presented to Council (business owners expressed concern about taxation rates for cultivation and manufacturing) In response staff contracted with SCI Consulting Group to prepare a report on recommended taxation rates.
August 23rdth – SCI presented their findings to the City Council.
Council referred the item to the Cannabis Subcommittee for a recommendation.
SCI Findings
Cannabis revenue is declining across the state.
City’s “current rates, rate structure, number and types of businesses are generally appropriate and well within California norms”.
Recommend a reduction to the tax rates for manufacturing to between 2.5% and 3% of gross receipts and for cultivation to between $7 to $10 per square foot of canopy and cultivation.
Cannabis Subcommittee Recommendations and Findings
Cannabis Subcommittee met on September 22, 2022
Recommended rate reduction of 2.5% of gross receipts for manufacturing and a rate of $7 per square foot of canopy for cultivation.
No other rates were recommended for amendment
The Subcomittee’s recommendation is based on
the testimony presented by business owners with concern about taxation rates for cultivation and manufacturing; and SCI’s recommended rate reduction for manufacturing and cultivation.
Cannabis Tax Rates – Current and Proposed
Business Type
Current Rate
Maximum Rate
Proposed Rate
Retail (Dispensary)
5% of Gross Receipts
10% of Gross Receipts
No Change
Retail Delivery
5% of Gross Receipts
10% of Gross Receipts
No Change
Manufacturing
5% of Gross Receipts
10% of Gross Receipts
2.5% of Gross Receipts
Cultivation
$15/sf of Canopy
$25/sf of Canopy
$7/sf of Canopy
Nursery
$2/sf of Canopy
$5/sf of Canopy
No Change
Distribution
No Tax
No Tax
No Change
Testing
No Tax
No Tax
No Change
Fiscal and Sustainability Impact
Business Type
Base Year
2021
$10 sq ft/ 3%
$8.50 sq ft/ 2.5%
$7 sq ft/
2.5%
Cultivation
$73,539
$49,026
$41,672
$34,318
Manufacturing
$669,760
$401,856
$334,880
$334,880
Total Revenue
$743,299
$450,882
$376,552
$369,198
Potential Loss
N/A
$292,417
$366,747
$374,101
Recommendation
A motion to adopt a Resolution to amend Commercial Cannabis taxation rates to 2.5% of gross receipts for manufacturing and $7 per square foot of canopy for cultivation pursuant to Section 19A.10.330 of the Salinas Municipal Code.
Existing rates for all other commercial cannabis business types are retained.