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Ordinance Amendment No. 2022-01 - Commercial Cannabis Regulatory and Tax <br />Updates <br />May 3, 2022 <br />Page 4 <br />2 <br />5 <br />0 <br />8 <br />Table 1: Proposed Financial Amendments <br />Item Impact <br />manufacturers taking advantages of Santa Ana’s proposed <br />favorable and administratively streamlined treatment of shared <br />manufacturers and the proposed relaxation and equalization of <br />the tax treatment as between manufactures and distributors <br />who are co-located, regardless of whether they are horizontally <br />or vertically integrated or not. <br />Similarly, there will be an increased likelihood of formation of <br />microbusinesses based on Santa Ana’s going-forward <br />equalization of microbusiness tax treatment, so that <br />microbusinesses will not have to include the annual $2,000 <br />basic tax rate assessment for each licensed category of <br />commercial cannabis business they choice to engage in, but <br />instead they will be liable to only pay once for the primary <br />commercial cannabis activity they choose to engage in. This <br />effectively affords microbusinesses the same net administrative <br />tax treatment as other categories of commercial cannabis <br />business. <br />Consumption Lounges & Temporary Consumption/Special Events and Shared-Use <br />Manufacturing – Elimination of Alternate Square Footage Tax Assessment <br />Consumption Lounges & Temporary Consumption/Special Events are locations where an <br />underlying retail cannabis business licensee is already subject to a square footage <br />assessment. Likewise, Shared Manufacturing premises are places where multiple shared <br />manufacturers (also known as sub-manufacturers) rotate on a variable schedule and <br />share space and equipment provided by a primary commercial cannabis manufacturing <br />business, the alternate square footage method of assessment is made too cumbersome <br />to apply and the need to impose it is mitigated by the fact that the primary manufacturing <br />business owning and controlling the manufacturing premises is already subject to the <br />assessment. Therefore, staff recommends that the City Council establish both the <br />Consumption Lounge & Temporary Consumption/Special Events and Shared Use <br />Manufacturing square footage tax rates at zero ($0) dollars, effectively eliminating the <br />Alternate Square Footage Tax Assessment method as a component in computing taxes <br />owed by shared manufacturers operating at primary manufacturing locations within the <br />City. Effective elimination of the alternate tax will remove the principle administrative tax <br />impediment to facilitating consumption and shared manufacturing within the City. <br />Microbusinesses – Elimination of De facto Assessment of Multiple Basic Tax Rate <br />Assessments