SF cannabis tax moves closer to ballot despite industry opposition

Despite criticism from the industry, the Board of Supervisors is poised Tuesday to place a cannabis tax on the November ballot.

The measure, proposed by Supervisor Malia Cohen, advanced out of the board’s Budget and Finance Committee Thursday after the third hearing on the proposal.

Cohen said she had made several concessions to the cannabis industry in crafting the measure, including lowering the tax rate and delaying its implementation. But that didn’t prevent calls for more changes last week.

“I want us to be good allies, but that doesn’t mean no taxes,” Cohen said.

Cohen emphasized that if the tax were approved by voters, the board could approve legislation later to adjust the rates. It would take at least two-thirds of the board to increase the tax rates, which couldn’t increase by more than 1 percent in a year and would not exceed 7 percent. A board majority could vote to decrease the rates.

The measure would impose a cannabis tax starting on Jan. 1, 2021. There would be a 2.5 percent tax on retail cannabis gross receipts up to $1 million and a 5 percent tax on gross receipts in excess of $1 million. There would be a 1 percent tax on gross receipts up to $1 millon in non-retail cannabis activities, and a 1.5 percent on gross receipts more than $1 million.

The industry asked to phase in the tax over three years, reaching 1.5 percent for retail gross receipts under $1 million and 3 percent on gross receipts in excess of $1 million. The industry supported the rates for non-retail but only if phased in over three years.

San Francisco Chamber of Commerce Senior Vice President Jim Lazarus opposed the measure and said it “may hurt the legalization of this industry.”

“Put a measure on that would have the support of the industry and the broader business community,” Lazarus said. “We believe that a tax rate that is excessive, comparing the legal cannabis industry to the underground illegal industry, will do nothing to move forward the type of changes we want in this industry, in bringing it out of the shadows.”

The City allowed existing medical marijuana dispensaries to begin selling recreational cannabis this year under the state measure Proposition 64. The Office of Cannabis is currently reviewing applications for additional locations to open through an equity program open to those who were disproportionately impacted by the war on drugs.

The full board will votes Tuesday on placing the cannabis tax on the November ballot, the deadline to do so.

Joshua Sabatini
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Joshua Sabatini

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