Sonoma County supervisors to consider cannabis tax changes

The Sonoma County Board of Supervisors is set to consider changes to the county’s cannabis cultivation tax, which growers have criticized as a drag on their struggling businesses.

The discussion, to be held Tuesday morning, comes nearly a year after the board approved a temporary tax reduction to help cannabis growers who say the county’s local tax and fee structure is overly burdensome.

It will mark the latest step county officials have taken to untangle the Sonoma County’s fraught cannabis regulations.

County staff are recommending the board use a modified version of its current tax structure, which charges cultivators on a square foot-basis.

The changes would tax outdoor cultivators $. 75 per square foot, indoor cultivators $12.50 per square foot and mixed-light cultivators $3 per square foot.

That would mean a decrease for outdoor growers and an increase for indoor cultivators, Roeser said. Small mixed-light operators, which use a combination of natural and artificial lighting, would likely see an increase while large mixed-light operators would see a decrease, Roeser said.

Outdoor operations comprise more than 80% of the growers subject to the county’s tax.

The new system is expected to generate about $1.8 million, matching the estimated revenue for fiscal year 2023-2024 under the current tax structure, said Erick Roeser, the county’s auditor-controller-treasurer-tax collector.

“This model is the most efficient for us to administer a program and also be able to budget on the county’s side,” Roeser said.

The county’s original tax framework set different rates by size of cultivated area. The new system sets a universal rate for each type of operator.

Cannabis industry representatives have spent over a year lobbying the county to ease their tax burden, painting a dire picture of financial distress among their ranks. Many have said the steep taxes and fees charged by the state and county are forcing them either out of business or into the illicit market.

There are 155 growers in the county’s jurisdiction outside of city limits, Roeser said. Of those, 130 are outdoor growers, 21 have indoor operations and four are mixed-light cultivators.

The county tax on cultivation is one in a layer of local and state taxes paid by cannabis growers, who say they face a heavier tax burden than other farmers.

In June, California ended its cultivation tax on growers and capped the excise tax at point of sale at 15% for three years.

Months earlier, in March 2022, the Sonoma County Board of Supervisors approved a 45% cannabis tax reduction effective until June 30. If passed, the new changes would take effect at the start of the new fiscal year on July 1, Roeser said.

County staff had also looked into taxing cultivators based on gross receipts, or gross sales, but chose to recommend the square footage model because gross receipts would require the county to establish an audit system to verify what cultivators are reporting, Roeser said.

Square footage is “easier because it’s a known quantity on our end,” said Roeser.

Representatives from the Sonoma County Cannabis Alliance, an organization that advocates for those working in the industry, could not be reached Monday for comment.

You can reach Staff Writer Emma Murphy at 707-521-5228 or emma.murphy@pressdemocrat.com. On Twitter @MurphReports.