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Ordinance Amendment No. 2022-01 - Commercial Cannabis Regulatory and Tax <br />Updates <br />May 3, 2022 <br />Page 5 <br />2 <br />5 <br />0 <br />8 <br />The City’s Business License Tax Code dealing with cannabis businesses establishes an <br />annual Basic Tax Rate assessment of $2,000 per each licensed commercial cannabis <br />activity engaged in at a single location in the City. This requirement poses a challenge for <br />microbusinesses, which were not contemplated as a commercial cannabis category to be <br />authorized to do business in the City at the time the Basic Tax Rate assessment was <br />adopted for commercial cannabis businesses pursuant to Voter Ballot Measure Y. The <br />Basic Tax Rate assessment was primarily intended as the means - together with the <br />Alternate Square Footage Tax - of assuring a minimum level of City revenue from <br />commercial cannabis businesses. Microbusinesses are required by the state to engage <br />in a minimum of three commercial cannabis activities, and thus are required by the City <br />to obtain business license for each of these activities. (No administratively reasonable <br />methodology exists or is likely to become available for combining all categories of <br />commercial cannabis assessment into one business license account.) <br />However, the requirement for multiple Basic Tax Rate assessments can be seen to have <br />a negative impact on the formation of microbusinesses within the City. To address this <br />issue, staff recommends that the City Council adopt a special proviso for microbusinesses <br />allowing them to pay the annual Basic Tax Rate only upon their predominate commercial <br />cannabis activity, and thus allow them to be exempted from the requirement on all of their <br />other licensed activities engaged in at a single location within the City. <br />Proposed Amendments – Regulatory (SAMC Chapters 18 and 40) <br />In addition to the proposed changes listed in Table 1, the City is proposing to update and <br />streamline certain sections of Chapter 18 (Medicinal Marijuana) and Chapter 40 <br />(Commercial Cannabis Business Activities Other Than Medicinal Marijuana). Table 2 <br />(Proposed Amendments to Chapters 18 and 40) describes the regulatory-framework <br />ordinance amendments. <br />Table 2: Proposed Regulatory Amendments <br />Item Amendment and Impact <br />Repeal and Readopt <br />Medicinal Cannabis <br />Retail Regulations <br />(SAMC Article XIII of <br />Chapter 18) <br />Amendment: <br />Removes medicinal cannabis retail regulations from Chapter 18 by <br />deleting Article XIII and readopting as Article II of Chapter 40. <br />Impacts: <br />Creates a single SAMC chapter addressing all commercial cannabis <br />(medicinal and adult-use) business activities, including retail, <br />cultivation, distribution, manufacturing, and testing. <br />Enhances internal consistency of commercial cannabis regulations by <br />consolidating all regulations into a single chapter within the SAMC.