Los Angeles County voters approve cannabis tax

Los Angeles County voters in California on Tuesday approved Measure C, which will impose a tax structure on businesses in unincorporated areas of the county once they receive permits, the Los Angeles Daily News reports.

At the time of writing, nearly 60% of the votes were in favor of Measure C when the final figures were received.

Measure C imposes several initial tax rates: 4% on gross receipts for retail stores, 3% for manufacturing and distribution, $4 per square foot for mixed light growing, and $7 per square foot for indoor growing. The Los Angeles County Board of Supervisors may decrease or increase tax rates within the maximum voter-approved after July 1, 2026.

It is important to note that Measure C itself does not legalize county cannabis sales, with additional steps before the industry can take off. The board of directors has yet to vote on this, and has said it will do so in early 2023.

“All cannabis business activities remain prohibited in the unincorporated areas of the county until the cannabis business permitting program begins in 2023,” reads the abstract of the bill. “This measure would make it legal for the county to tax the earnings of cannabis companies operating in those areas. Once the permitting program begins, a cannabis entrepreneur must obtain all necessary permits and licenses from appropriate state and local regulatory agencies, including a cannabis business license issued by the Los Angeles County Office of Cannabis Management.”

The Office of Cannabis Management (OCM) under the Los Angeles County Division of Consumer and Business Affairs is developing an equitable commercial cannabis program that includes permits and resources for eligible applicants, with a planned launch in late 2023.

“The approach we have chosen will fairly distribute legal cannabis businesses in each regulatory district and establish that cannabis cultivation is only permitted indoors – not outdoors in greenhouses,” Supervisor Kathryn Barger said at a recent board meeting.

“Our board needs to be clear: we will not tolerate illegal cannabis dealings. Growers operating illegally undermine our efforts to build a regulated and responsible cannabis industry, and often do so at the expense of the rural communities I represent. I am fully committed to complying with the law and will use all available resources to improve enforcement and mitigation efforts.”

County officials estimate a total of $10.4 million in tax revenues that would go to the Los Angeles County General Fund and a cannabis equity program that would provide equitable entry into the cannabis industry.

For now, however, cannabis businesses will remain prohibited in unincorporated areas of the county until the permitting program begins.

All cannabis businesses, existing or newly formed, in the unincorporated territories must register with the Los Angeles County Treasurer and Tax Collector within 30 days of commencement of operations following commencement of the permitting program or within 30 days of the effective date of this regulation.

Rules are still being developed, but Los Angeles County officials said the original plan is expected to allow up to 25 retail cannabis stores, 25 retail supply stores, 10 indoor/mixed light grow facilities, 10 production facilities, and 10 distribution facilities statewide 10 testing laboratories.

A similar vote also took place nearby in San Diego County.

Voters also decided whether or not Measure A should be approved in the unincorporated areas of San Diego County to pay a tax that would generate revenue for state services such as health care, fire protection and parks.