Laserfiche WebLink
Ordinance Amendment No. 2019-01 — Commercial Cannabis Ordinance Updates <br />August 20, 2019 <br />Page 5 <br />each point in the supply chain. This would leave only their third -party sales and/or their minimum <br />square footage tax, whichever is greater, to be reported and paid. <br />Security Deposits <br />Concerning security deposits, it was determined that nominal security deposit language setting a <br />minimum security deposit amount of $10,000 or the average of one month's remittable <br />commercial cannabis tax, whichever was greater, would be included in the final text of Measure <br />Y. This was done with an understanding that the City would be open via a subsequent <br />ordinance, as provided under the terms of Measure Y to reducing and capping the amount of <br />security deposits for commercial cannabis businesses to $10,000 or one month's average <br />remittable commercial cannabis tax whichever is least. Also, it would permit two or more <br />vertically/horizontally integrated cannabis businesses to be covered by a single deposit, provided <br />that: clear detailed procedural language be added surrounding security deposits, their <br />maintenance, application, replenishment and refunding and that similarly detailed language be <br />added concerning sales, assignments, transfers and terminations of cannabis businesses to <br />ensure the City is secure in its continued receipt of cannabis business license tax revenues. <br />Allocated Gross Square Footage <br />In the case of integrated distribution and/or manufacturing cannabis businesses, the minimum <br />gross square footage tax reported would reflect the allocated square footage actually utilized by <br />the business as verified by the City, rather than the maximum square footage of the premises. <br />The gross square footage tax on cultivation would continue to be based on canopy size as <br />reported to the state and as verified by the City. The gross square footage tax for adult -use retail <br />businesses would continue to be based on the maximum size of the premises. <br />Gross Receipts Tax Rate Reduction for Cannabis Testing Laboratories <br />Local jurisdiction tax rates on commercial cannabis testing laboratories vary across the state. <br />When the City's commercial cannabis testing laboratory ordinance was adopted in March 2018, <br />testing laboratory tax rates ranged from 2 to 10 percent in various jurisdictions statewide. The <br />City currently collects a tax of 5 percent of gross receipts or $1.50 per gross square foot, <br />whichever is the greater of the two calculations. Nearby, the City of Costa Mesa collects 6 <br />percent; Long Beach collects 6 percent, with the option to increase to 8 percent; Bellflower <br />collects 5 percent, (with multiple 2.5 percent annual increases scheduled beginning July 1, 2020 <br />until a 10 percent cap is reached) and Irvine collects no taxes. It is important to note that <br />beginning in 2015 the City of Irvine ceased collecting a business license tax for any type of <br />business in the City. <br />Cannabis testing laboratories play a crucial role in ensuring product safety for medicinal and <br />adult -use consumers. Testing laboratories examine products for pesticides, minerals, potency, <br />and toxicity. These facilities employ highly -skilled and educated individuals and require <br />purchasing and installation of costly equipment. Although the City's current 5 percent tax rate is <br />consistent with other local jurisdictions with the exception of Irvine, the City has a continuing <br />interest in promoting safe medicinal and nonmedicinal cannabis and cannabis products for all <br />users and to ensure the sustained growth of the regulated medicinal and commercial cannabis <br />75A-5 <br />