San Diego Lowers Taxes For Marijuana Operators To Help Them Compete And Benefit Community

San Diego’s Board of Supervisors voted to lower tax rates for cannabis shops in the county to allow businesses to compete with those in neighboring cities, reported San Diego Union-Tribune. Following a 4-1 board vote, the tax measure would be imposed on five existing legal marijuana operations and any others opening their doors.

“As we set these dollars that are collected, I do think they should be benefiting the communities that they’re in,” said Jim Desmond, one of the supervisors. “County code allows for consumption or smoking and tasting rooms on site. If people are getting high and driving on winding roads (that are) dimly lit in the unincorporated area, that’s a bigger problem.”

Board chair Nora Vargas proposed taxing crops by square footage rather than revenue, which would more predictable cost for cannabis business owners, she said. 

Under the new system, marijuana operations (in unincorporated county areas) would pay up to $7 per square foot for cultivation, 2.5 percent for manufacturing, 1 percent for testing, and 2 percent for distribution and gross receipts of retail sales, per the local news outlet. 

While some marijuana operators said that even the reduced tax rates are too high, others said that to cover costs (including law enforcement, public health, and the impact of market competition) the board should establish higher tax rates.

What's Next?

On February 28, the board will vote on whether or not to authorize the cannabis tax ordinance. If approved, the tax will go into effect on April 1, with the first payments due in July.

In 2022, Gov. Gavin Newsom signed Assembly Bill 195 which eliminates the state marijuana cultivation tax. A study conducted that year highlighted the impact an immediate elimination of the cultivation tax would have on critical issues facing the state's legal cannabis market from seed to sale. The state could increase legal cannabis sales and bring in 123% more in total monthly cannabis-related tax revenue by 2024 by eliminating its cultivation tax, according to the study.

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