San Francisco Cuts Cannabis Tax To Crack Down On Illegal Sales

With recreational marijuana becoming legal in more and more states, legal dispensaries have become a commonality.

Unfortunately, that does not mean that the illicit cannabis trade cannot and does not compete. In fact, years after the plant's legalization and with the cannabis market booming, most sales are still taking place underground.

Strict regulations in the Golden State resulted in the closing of shops with industry operators either fleeing the state or selling their product on the illegal market that approaches $8 billion annually, Politico writes.

In an attempt to suppress illegal sales, San Francisco supervisors unanimously passed an ordinance to suspend the city's Cannabis Business Tax through Dec. 31, 2022, CBS San Francisco reports.

Latest Startup Investment Opportunities:

According to supervisor Rafael Mandelman who wrote the legislation, the measure is set to help support legal cannabis retailers as they struggle to compete with illegally sold cannabis.

The tax, which imposes a 1% to 5% citywide tax on gross receipts from cannabis businesses, was approved by San Francisco voters over three years ago and is expected to go into effect on Jan. 1, 2022.

"Cannabis businesses create good jobs for San Franciscans and provide safe, regulated products to their customers," Mandelman said in a statement. "Sadly, the illegal market is flourishing by undercutting the prices of legal businesses, which is bad for our economy as illegal businesses pay no taxes while subjecting workers to dangerous conditions and consumers to dangerous products. Now is not the time to impose a new tax on small businesses that are just getting established and trying to compete with illicit operators."

Once the legislation is in effect, Mandelman said his office would collaborate with the City Controller's Office, the Treasurer and Tax Collector's Office, the Office of Cannabis and others on the analysis of data on cannabis business sales in San Francisco. They will then present a set of recommendations on the tax rate and structure for cannabis retailers to the Board of Supervisors in addition to implementing a new plan for 2023.

Photo: Courtesy of Kelly Sikkema on Unsplash