Proposal to put cannabis tax on Stanislaus County ballot hits a snag. What’s next?
Stanislaus County supervisors voted 3-2 on Tuesday to put a cannabis tax on the ballot in November.
But that won’t be enough July 26, when a four-fifths vote is required for a formal decision to put the measure before voters countywide. Either Supervisor Mani Grewal or board Chairman Terry Withrow, both of whom voted “no” Tuesday, will need to change his mind.
Grewal wanted to delay the tax measure for two years, which would allow the county and cannabis operators to agree on a tax rate.
Withrow expressed uneasiness about other tax measures on the ballot in November, including a Modesto sales tax hike that’s essential to paying for city services, he said.
Conceivably, a cannabis tax paid by business owners could lessen the chance of passing the other tax measures. A Modesto City Schools bond measure and other tax items will be on the ballot in Stanislaus County.
The county is proposing an initial 8% tax on gross retail cannabis sales, along with a 4% tax on manufacturing, 2.5% on cultivation and distribution and 1.5% on testing. Starting in 2024, the county could adjust the retail tax to a maximum 10% and tax cultivation and distribution at 3% and testing at 2%, based on the consumer price index.
All voters in the county would decide if the cannabis measure passes, but it would apply only to cannabis businesses in the unincorporated areas.
In a new wrinkle Tuesday, county officials said the taxes could be assessed on illegal marijuana growers. The taxes could be collected when illegal grows are taken down by law enforcement.
Cannabis business owners have complained they can’t afford the fee obligations in their development agreements with the county. The proposed cannabis tax would replace land-use agreements that have required businesses to pay hundreds of thousands of dollars in annual fees to the county, even though cannabis sales have tanked recently.
Some cannabis business owners said the proposed retail taxes of 8%, which could increase to 10% starting in 2024, are too burdensome for legal businesses, who are competing with black-market operators who don’t pay fees and other overhead costs.
Jason David, owner of the dispensary Jayden’s Journey, said the county-approved businesses also compete with far more visible dispensaries inside Modesto. “We have not made a profit in two years,” David said.
Michael O’Leary of Medallion Wellness said the legal industry needs the tax measure to eliminate the flat fees in development agreements that are very costly.
Whether the cannabis tax is put on the Nov. 8 ballot or not, the county is negotiating amendments to development agreements to offer relief to struggling cannabis businesses that went through the county’s permit process. The county imposed a limit of 61 permits, including seven retail outlets, after marijuana was legalized for recreational use in 2016.
This story was originally published July 12, 2022 at 1:37 PM.
