Is a cannabis tax coming to Stanislaus County? Leaders to decide on ballot measure
Stanislaus County leaders could vote Tuesday to put a cannabis tax on the November ballot to replace development agreements with licensed cannabis businesses.
After California voters approved marijuana legalization in 2016, development agreements were touted as a way for the county to take in revenue from approved cannabis businesses and use the funding to shut down illegal marijuana grows.
Cannabis business owners have complained this year they can’t afford the fee obligations in their development agreements with the county. The agreements have required one retail outlet to pay an annual community benefit fee ranging from $600,000 to $700,000 over a five-year agreement.
The county is proposing a ballot measure that would impose an initial 8% tax on gross retail cannabis sales, a 4% tax on manufacturing, 2.5% on cultivation and distribution and 1.5% on testing. Under the proposed tax measure, the county starting in 2024 could adjust the retail tax upward to 10% and collect a maximum of 3% on cultivation and distribution and 2% on testing.
The November tax measure would require a majority vote for approval. The taxes would apply to dispensaries and other cannabis operators in the unincorporated areas.
The county is proposing initial tax rates that are the same as cannabis taxes currently charged by Modesto.
The staff report for Tuesday’s board meeting does not have a definitive revenue estimate if the tax measure is approved by voters, because of the uncertainty in the cannabis industry. But the revenue will be substantially less than what was expected from development agreements.
“Future gross revenue from existing cannabis operators is unknown,” the report says.
Cannabis merchants told the county in May that their businesses are struggling to survive due to unfair competition with illegal marijuana growers and the heavy fee obligations in development agreements with the county.
County supervisors decided in May to eliminate a community benefit contribution and come up with another opportunity for cannabis outlets to give back to the community.
The proposed ballot measure would replace the community benefit fee in development agreements.
“I think it’s a fairer approach,” Board Chairman Terry Withrow said Monday. “It is similar to Modesto’s tax. There is a lot of black market out there that we are trying to eradicate. With our development agreements, it makes it tough for these guys to operate legitimately.”
Agreements could be amended
The county is not waiting until November to reduce the fees for some cannabis outlets. The board could schedule a July 26 public hearing to consider amending the development agreement with Jayden’s Journey, a dispensary on Pentecost Avenue in north Modesto.
The county is proposing that Jayden’s Journey pay $268,460 in community benefit fees this year and in 2023, or 8% of gross sales, whichever is larger. If the amendment is approved, the county would see a total reduction in revenue of $463,080 from Jayden’s Journey.
County supervisors are also considering an amended agreement with the People’s Remedy on Lone Palm Avenue in west Modesto. The People’s Remedy would pay $331,200 or 8% of gross sales this year, in 2023 and in 2024, which is a third of the $1.07 million in retail fees under the original development pact.
With the elimination of the community benefit contribution, the cannabis shop also will get a break on paying about $70,000 annually to the county.
Mark Ponticelli of the People’s Remedy told supervisors in May that the outlet was being overtaxed and could not continue to pay the community benefit fee while staying in business.
The county Board of Supervisors will meet at 9 a.m. Tuesday in the basement chamber of Tenth Street Place, 1010 10th St. in Modesto.
