The San Francisco Board of Supervisors on November 30 voted to suspend the city’s cannabis tax for one year in the hopes of combatting the city’s illicit, unlicensed market.
Approved by voters in 2018, the additional 1-5% citywide tax on gross receipts from cannabis businesses was set to go into effect on January 1, 2022, but will suspended until 2023.
“Sadly, the illegal market is flourishing by undercutting the prices of legal businesses, which is bad for our economy as illegal businesses pay no taxes while subjecting workers to dangerous conditions and consumers to dangerous products,” Supervisor Rafael Mandelman said in a press release. “Now is not the time to impose a new tax on small businesses that are just getting established and trying to compete with illicit operators.”
Mandelman’s office cited a December report from the California Legislative Analyst’s Office that found that increased state cannabis tax rates were directly linked to illegal cannabis sales. California law imposes a 15% state excise tax on retail cannabis sales as well as a tax on cannabis cultivation. It also allows for local municipalities to tack on their local taxes as well. California’s illegal market is still estimated at about $8 billion, twice that of the licensed market.
Mandelman plans to work with the City Controller’s Office, the Treasurer and Tax Collector’s Office and the Office of Cannabis to analyze data on cannabis business sales in the city with the goal of presenting a set of recommendations on tax rate and structure for cannabis retailers to the Board of Supervisors for implementation in 2023.
— Brian Beckley