Laserfiche WebLink
Ordinance Amendment No. 2022-01 - Commercial Cannabis Regulatory and Tax <br />Updates <br />September 20, 2022 <br />Page 2 <br />2 <br />5 <br />0 <br />8 <br />NS-2684) in November 2014 ending with Ordinance NS-2944 in May 2018. In November <br />2018, Santa Ana voters approved Measure Y (Ordinance NS-2962), which established <br />commercial cannabis business license taxes for adult-use cannabis retail sales, cannabis <br />cultivation, distribution, manufacturing, and testing. The most recent commercial <br />cannabis ordinance updates were adopted by the City Council in September 2019 <br />(Ordinance NS-2973). These updates amended various sections of Chapters 18, 21, and <br />40 of the Santa Ana Municipal Code (SAMC) to address horizontal and vertical integration <br />of cannabis businesses, to streamline and modernize regulations in response to State <br />changes allowing microbusinesses and shared manufacturing, and to establish <br />consistency among various SAMC sections addressing employee badge requirements <br />and minimum purchasing age. <br />Ongoing changes to State cannabis laws and evolving market demands prompt the City <br />to regularly revisit its ordinances and tax collection to ensure that Santa Ana: (1) maintain <br />its competitive position in the region; (2) remain compliant with applicable State laws; and <br />(3) streamline and equalize its implementation of non-retail commercial cannabis taxation. <br />In response to these changes, the City is proposing to update the SAMC in various <br />chapters and sections to address medicinal cannabis retail, consumption lounges and <br />temporary events, Measure BB Waitlist termination, retail facility relocation, commercial <br />cannabis eligible areas, commercial cannabis tax rate reductions affecting nominal gross <br />receipts tax rates as well as alternate (minimum) square footage tax rates for commercial <br />cannabis cultivation, distribution, and manufacturing, and adopt language addressing <br />proposed tax treatment of microbusinesses and shared manufacturing. These updates <br />are intended to foster an environment in which commercial cannabis businesses continue <br />to operate safely and in accordance with all applicable local and State regulations while <br />maintaining Santa Ana’s top position in the regional cannabis industry. <br />Market Analysis <br />On July 29, 2022, the City Council conducted a work-study session to discuss municipal <br />code changes related to Cannabis and requested a market analysis with comparative tax <br />information from other cities. The comparative tax information is included in Exhibit 5. <br />Based on the City Council’s discussion of July 29, 2022, and the comparative tax <br />information available, staff recommends a reduction of the Cannabis supply tax rate for <br />cultivation, distribution, and manufacturing from the current 6% to 1%, as outlined below. <br />Cannabis business with multiple licenses to cultivate, manufacture, distribute and sell <br />product can take advantage of the vertical and horizontal integration approved by City <br />Council in 2019 to further reduce their net gross receipts tax burden. Multiple-license <br />businesses only owe a City tax when they sell to a third party, not when they internally <br />sell/transfer product from one of their vertically/horizontally integrated operations to <br />another.