75A - PH - CANNABIS UPDATE - Laserfiche WebLink

Home Browse Search

Ordinance Amendment No. 2019-01 — Commercial Cannabis Ordinance Updates July 16, 2019 Page 2 BACKGROUND The City of Santa Ana permits a variety of types of cannabis business activity, which include retail sales of medicinal and adult -use cannabis and cannabis cultivation, distribution, manufacturing, and testing. These cannabis business activities were permitted through adoption of multiple ordinances beginning with Measure BB (Ordinance NS-2684) in November 2014 ending with Ordinance NS-2944 in May 2018. In November 2018, Santa Ana voters approved Measure Y (Ordinance NS-2962), which established commercial cannabis business license taxes for adult -use cannabis retail sales, cannabis cultivation, distribution, manufacturing, and testing. Medicinal cannabis retail sales taxes were not modified by Measure Y and continue to be subject to taxes pursuant to Measure BB. Multiple changes to State cannabis laws and changes in market demands prompted the City to revisit its ordinances and tax collection to ensure that Santa Ana maintains its competitive position in the region, remain compliant with applicable State laws, and streamline its implementation of cannabis taxation. When added to Santa Ana's local cannabis taxes, the State's assessments on cannabis goods, which include sales tax, excise cannabis tax, and cultivation tax, result in legally -operating and permitted commercial cannabis businesses having to confront a combined state and local tax rate exceeding 50 percent of the retail sale value of their cannabis goods. This 50-percent rate discourages businesses from seeking the required permits to operate legally and in tandem with a cumbersome and rapidly -changing regulatory framework that can foster a continued illicit cannabis market, which is to the detriment of Santa Ana's permitted operators. DESCRIPTION AND BACKGROUND Table 1 (Proposed Amendments to Chapter 21) describes the finance -related ordinance amendments. Additional details are provided in the subsections that follow. Table 1: Proposed Financial Amendments Item Impact Vertical and Horizontal Amendment: Integration (SAMC Sections 21-131.2 and 21- Allow vertical and horizontal integration of business structures for 142) businesses engaging in multiple types of commercial cannabis business activity. Includes allowance for vertical and horizontal integration of commercial cannabis business activities involving both medicinal and nonmedicinal cannabis retail businesses. Impacts: • Incentivizes cannabis businesses to expand operations within the City and encourages new businesses to enter the Santa Ana marketplace. • Allows for the deduction of intra-party sales and/or transfers of cannabis and cannabis products occurring within a single integrated cannabis business from reportable gross receipts of cannabis businesses. 75A-2