Legalizing marijuana in California was the easy part, given the cultural swing toward acceptance of the long-outlawed drug. Figuring out how to pay for regulation of the booming cannabis industry, however, could prove more problematic in Sonoma County and statewide.
A cannabis business tax, proposed by the Board of Supervisors to cover the cost of implementing regulations for the newly recognized crop, will go before voters countywide in three weeks in a special election that is causing angst among the people who depend on marijuana for their livelihood.
Measure A is the only countywide issue in the March 7 election, and mail-in votes are already being cast.
An approved tax, at the proposed initial rates would generate $6.3 million a year from cannabis businesses outside city limits. County officials say the funding is critical to usher the pot industry out of the legal shadows.
“Let’s legalize, let’s regulate and let’s tax,” said Shirlee Zane, the Board of Supervisors chairwoman. “They all come together, like it or not.”
If the tax fails to win majority support, however, county officials say they will have to abandon a July 1 startup date for accepting cannabis business permit applications, a step that could cost pot operators the chance to get in line for state permits at the start of 2018 and possibly expose them to criminal prosecution.
What’s unusual about the election is that about 100,000 voters — based on an anticipated 35 percent turnout — will be weighing a tax that few of them will pay. A chorus of marijuana growers and advocates, including a state trade association and a labor union, meanwhile, is decrying the tax as excessive and ill-conceived.
“Once again our industry has to make the choice between progress and what feels like financial extortion,” said Tawnie Logan, executive director of the Sonoma County Growers Alliance.
By progress, she means the historic approval in November of Proposition 64 by 57 percent of state voters, setting in motion a series of steps that will legalize the recreational cannabis trade in California.
Logan’s 260-member alliance opposed the initiative, in part because it set a state marijuana sales tax of 15 percent and authorized local taxes, as well.
Logan said her group agonized over Measure A, finally announcing Friday it would remain neutral “with hardline concerns” over the tax capped at 10 percent of gross receipts of pot businesses in the unincorporated area outside the county’s nine cities.
The initial tax rates will be lower — ranging from 0.5 percent to 5 percent of receipts — but critics say there is no certainty when or whether the supervisors might bump up the rates to levels that some contend could smother small operators.
At the proposed initial rates, the tax would generate $6.3 million a year, and at 10 percent across the board for cultivators, manufacturers and other businesses it would collect $15.6 million a year.
There are about 9,000 cannabis industry members in Sonoma County, including 5,000 growers, Logan said.
The outcome of the Measure A election will have no bearing on Proposition 64’s guarantee that California adults can legally grow and possess modest amounts of marijuana.
But the stakes are high for regulation and taxation of a $7 billion industry. Statewide, more than two dozen local governments, including Cloverdale and Point Arena, and seven counties, Lake and Mendocino among them, secured voter approval of marijuana tax measures in November, according to research by Santa Rosa officials, who are drafting a pot tax proposal for the June ballot.
Measure A at a glance
The only countywide issue in the March 7 special election, which will cost the county $400,000.
A business tax proposed by the county, paid by cultivators and manufacturers, to initially generate $6.3 million annually to cover the cost of implementing regulations for the crop.
If the tax fails, the July 1 start date for accepting applications for cannabis business permits may be abandoned.
Keep up to date with the evolving business, politics, science and culture of cannabis at Emerald Report.