Item 25 - Ordinance Amendment No. 2022-01 - Commercial Cannabis Regulatory and Tax Updates

Home Browse Search

Ordinance Amendment No. 2022-01 - Commercial Cannabis Regulatory and Tax Updates September 20, 2022 Page 6 2 5 0 8 Table 1: Proposed Financial Amendments Item Impact commercial cannabis activity they choose to engage in. This effectively affords microbusinesses the same net administrative tax treatment as other categories of commercial cannabis business. Consumption Lounges & Temporary Consumption/Special Events and Shared-Use Manufacturing – Elimination of Alternate Square Footage Tax Assessment Consumption Lounges & Temporary Consumption/Special Events are locations where an underlying retail cannabis business licensee is already subject to a square footage assessment. Likewise, Shared Manufacturing premises are places where multiple shared manufacturers (also known as sub-manufacturers) rotate on a variable schedule and share space and equipment provided by a primary commercial cannabis manufacturing business, the alternate square footage method of assessment is made too cumbersome to apply and the need to impose it is mitigated by the fact that the primary manufacturing business owning and controlling the manufacturing premises is already subject to the assessment. Therefore, staff recommends that the City Council establish both the Consumption Lounge & Temporary Consumption/Special Events and Shared Use Manufacturing square footage tax rates at zero ($0) dollars, effectively eliminating the Alternate Square Footage Tax Assessment method as a component in computing taxes owed by shared manufacturers operating at primary manufacturing locations within the City. Effective elimination of the alternate tax will remove the principle administrative tax impediment to facilitating consumption and shared manufacturing within the City. Microbusinesses – Elimination of De facto Assessment of Multiple Basic Tax Rate Assessments The City’s Business License Tax Code dealing with cannabis businesses establishes an annual Basic Tax Rate assessment of $2,000 per each licensed commercial cannabis activity engaged in at a single location in the City. This requirement poses a challenge for microbusinesses, which were not contemplated as a commercial cannabis category to be authorized to do business in the City at the time the Basic Tax Rate assessment was adopted for commercial cannabis businesses pursuant to Voter Ballot Measure Y. The Basic Tax Rate assessment was primarily intended as the means - together with the Alternate Square Footage Tax - of assuring a minimum level of City revenue from commercial cannabis businesses. Microbusinesses are required by the state to engage in a minimum of three commercial cannabis activities, and thus are required by the City to obtain a business license for each of these activities. (No administratively reasonable methodology exists or is likely to become available for combining all categories of commercial cannabis assessment into one business license account.)