Last week, Santa Rosa voters approved a cannabis business tax (“Measure D”) that applies to commercial medical cannabis businesses within the city. The measure received nearly 78% of the vote, indicating that Santa Rosa residents see the value that the cannabis industry brings to the city. Santa Rosa officials cited a need to offset the cost of regulating the cannabis industry, which has been growing steadily in the city over the past few years, as the need for the tax. The City does not yet have an estimate of how much revenue the tax will generate.
The tax ordinance imposes taxes on the following commercial medical cannabis activities: cultivation (including nurseries), manufacturing, distribution and dispensaries. The tax is a general tax, meaning the city can use it for any purpose, as opposed to dedicating the revenue to specific items like cannabis enforcement. Cannabis businesses paying the special cannabis tax would be exempt from the city’s general business tax, which costs up to $3,000 per year.
For commercial cultivation, the maximum rate is $25 per square foot (the initial rate will likely be much lower), adjusted annually by CPI, or 8% of gross receipts. For commercial manufacturers, distributors, and dispensaries, the maximum rate is 8% of gross receipts. The City Council may increase or decrease the current rates by resolution, provided that the cap is not exceeded. Rates shall be set for a minimum of two years. The initial rates will be set by resolution by the City Council, at which time the tax will go into effect.
Under the tax ordinance, cannabis businesses must register each year and pay a $100 annual registration fee. Tax payments are due each quarter, and there are penalties for failure to pay. Additionally, violation of the tax ordinance can be deemed a misdemeanor. Finally, simply paying the cannabis business tax will not authorize an unlawful business.