Los Angeles is raising cannabis tax rates to keep California’s illegal market alive
Los Angeles County voters overwhelmingly voted in favor of a measure that will impose business taxes on cannabis operations operating in unincorporated regions after such operations begin operations. Cannabis companies operating in unincorporated regions must comply with county laws, which are currently being developed. The Board of Directors is expected to consider an ordinance next year.
Voters passed Measure C earlier this month, laying out a tax schedule for those companies once they are finally admitted in the meantime. The proposal established a range of initial tax rates, including $4 per square foot for mixed-light grows and $7 per square foot for indoor grows. Rates were set at 4% for retail gross receipts and 3% for production and distribution.
According to district officials, the levies will initially bring in $10.36 million per year. The regulation sets future fee increases after these initial increases, which take effect on July 1, 2026.
The initial plan is expected to allow up to 25 cannabis retail establishments, 25 retail delivery establishments, 10 indoor/mixed light cultivation establishments, 10 production establishments, 10 supply establishments and 10 testing lab establishments nationwide District employees, although guidelines for marijuana operations in rural areas are being developed.
An even distribution of companies is expected in each of the five supervisory districts.
THE IMPACT ON EXTERIOR AND RURAL AREAS
In August, supervisor Kathryn Barger claimed that the tax measure does not suggest an increase in outdoor growing. Her district includes the rural northern parts of the county, which are hubs for illegal marijuana operations.
Under the strategy we have chosen, cannabis can only be grown indoors and not outdoors in greenhouses, as Supervisor Kathryn Barger explained at a recent board meeting. This ensures that legal cannabis businesses are fairly distributed among each regulatory district.
Our board must state unequivocally that we will not condone illegal cannabis dealings. Illegal breeders are sabotaging our efforts to build a controlled and ethical cannabis sector, often at the expense of the rural communities I represent. “I will gather all available resources to increase enforcement and deterrence because I am strongly committed to upholding the law,” she explained.
WHAT IS MEASURE C ABOUT?
California legalized the recreational use and possession of marijuana by adults in 2016, but local state governments are free to choose whether and how to collect taxes on marijuana sales that occur within their borders.
The effort to resolve this is Action C proposed by LA County. In the unincorporated portions of Los Angeles County, the proposed ballot prompts voters to approve a tax on cannabis companies, including those involved in the production, distribution and sale of the drug. The county’s overall goal is to control the cannabis market in unincorporated regions, and approving the tax is a key component of that effort.
Cannabis sales in Los Angeles County would not be eligible under Measure C. They would still have to be put to a vote by the Board of Supervisors, which has said it will do so in 2023.
For the Los Angeles County General Fund and a marijuana stock program that would give people equal opportunity to enter the cannabis sector, the county projects total taxable income of $10.4 million.
Los Angeles County Cannabis Business Tax Measure
The voting summary for this action was:
The measure legislates a tax on cannabis businesses in unincorporated areas of Los Angeles County at annual rates not to exceed $10 per square foot for cultivation (adjusted for inflation) and a percentage of gross receipts for various cannabis businesses, including retail (6%). . testing laboratories (2%); distribution (3%) and for manufacturing and all other cannabis businesses (4%); will generate between approximately $10,360,000 and $15,170,000 annually.
SIMILAR CANNABIS TAX MEASURES IN OTHER COUNTRIES
Cannabis company tax legislation was approved by the San Diego County Supervisors in June; it still has to be approved by voters. Thanks to the actions, measure A is now on the ballot paper in November.
At the June 15 board meeting, San Diego County Supervisor Nathan Fletcher stated that they have taken another step in our progress toward establishing a safe, controlled, and legalized marijuana market in the unincorporated areas, and he believes that this is a step forward is a good endeavor.
Jim Desmond, the county clerk, asked why only the rural county would be subject to the marijuana business tax and why voters would have to decide that issue on a statewide basis. According to county personnel, doing otherwise is illegal because it is California law.
The proponents’ argument is that cities like San Diego, Lemon Grove, La Mesa, Oceanside, and Vista already have regulations governing cannabis businesses. Measure A would generate additional funds to close illicit cannabis operations while covering increased regulatory costs.
Proponents of Measure A contend that it is a nonpartisan approach to developing a safe, controlled, and legal adult cannabis market in San Diego County and that taxpayer money will be preserved in the region. According to proponents, it taxes the businesses rather than the people who use cannabis. As a result, there will be no double taxation as the tax does not apply to cannabis businesses in incorporated cities. Proponents added that the tax was necessary to shut down the illegal cannabis businesses that have plagued several areas of the county.
Critics of the cannabis business tax argued that it was unfair because it only applied to companies operating in the unincorporated areas of the county, even though all county residents would be able to vote on the issue. Aside from doubts as to whether the tax revenues really fund services in the tax jurisdictions, the official refutation is also dubious with regard to claims of social equality.
Los Angeles County’s cannabis tax approval (Measure C) is a step taken to control illegal cultivation in the county by restricting outdoor production and regulating indoor or mixed-light cultivation.
CANNABIS RATES, READ MORE…
COULD CALI’S CANNABIS TAXES REACH 45% OR MORE?