Sonoma County supervisors to consider cannabis tax revision

The Sonoma County Board of Supervisors has signaled its interest in offering tax relief to local cannabis cultivators, who have joined the growing chorus of complaints from industry advocates about what they call an excessive tax burden.

The board on Tuesday asked staff to draft a resolution delaying the county-imposed tax for cannabis cultivators for one quarter, meaning growers would have to pay that installment at a later date.

Supervisors hope the delay — set to come before the board for a vote on Jan. 25 — will allow time to explore more long-term tax relief options.

“People are hurting and as other industries have been hurting with pandemics or fires, we’ve taken steps to alleviate the need and support that industry,” said Supervisor Susan Gorin. “So I think we need to do that as well.”

Like their counterparts across California, Sonoma County cannabis farmers and other industry players have been clamoring for relief from state and local taxes that they say are pushing legal growers out of business.

Local growers have ramped up their campaign against local regulation and taxes for months, but a recent cultivation-tax increase at the state level has fanned the flames.

The state taxes growers by the ounce. State and local jurisdictions also charge excise tax at point-of-sale of up to 15%.

In addition, Sonoma County taxes local growers at different rates on a per-square-foot basis for outdoor, indoor and mixed light crops. Cities can also add their own taxes.

A cannabis farmer with a specialty outdoor cultivation permit using 5,000 square feet to grow 200 plants would pay nearly $41,000 in annual taxes between the state and the county, Assistant County Administrator Christina Rivera informed the board.

Of that total, county taxes make up about $8,500, Rivera said.

The median annual tax revenue collected by the county in recent years from cannabis operators is $2.5 million, according to a staff report.

That total did not include revenue brought in from code violation penalties, which James Gore, chair of the board, asked staff provide for future meetings.

The bulk of the tax revenue for the county goes toward its cannabis program, an oversight system crippled by a clogged permitting process and cumbersome ordinance which the county has struggled to untangle.

In its jurisdiction, Sonoma County has about 170 cannabis cultivators, five dispensaries and five manufacturers, all paying taxes, said Erick Roeser, the county’s Auditor-Controller-Treasurer-Tax Collector.

While open to growers’ requests for relief, supervisors David Rabbitt and Chris Coursey in particular emphasized the need to first ensure the county would be able to cover the costs of cannabis regulation if the board pursues more long-term relief measures.

Rabbitt reminded the board that the county also is set to bankroll an outside consultant’s long-awaited, comprehensive environmental review of its cannabis ordinance.

Multiple Sonoma County marijuana farmers and industry advocates who weighed in on the board’s discussion Tuesday, said growers were unable to keep up with the high costs and so were either selling out to corporate operators or dropping into the black market.

“If you folks are going to continue to treat us like criminals, then the industry will continue to go back into black market and those folks will never ever come back into the legal market,” said Vince Scholten from Sebastopol-based Hessel Farmers Grange.

Rachel Zierdt, a Sonoma County resident, worried about how the county would compensate for reduced cannabis taxes and said she did not want her tax dollars to support the local industry.

“Maybe Sonoma County isn’t the right place to be growing the cannabis at this point,” Zierdt said.

While open to exploring local tax relief options supervisors also have their eyes on the state, where the bulk of the tax burden lies.

State Sen. Mike McGuire, D-Healdsburg, said he intends to introduce legislation this year to eliminate the cultivation tax and have a higher excise tax that would include growers.

McGuire has argued that it is unfair for cannabis growers to have to pay a constant tax rate per ounce after suffering dramatic drops in pricing in 2021 due in part to the flood of black market product.

“We all have a role in how we got to this particular point, certainly there’s plenty of blame to go around with all levels of government,” Rabbitt said.

He added blame also lies with “those who promised the world within the industry. The problem really exists at the state level.”

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