Pubdate: Thu, 30 Jun 2016
Source: North Coast Journal (Arcata, CA)
Column: The Week in Weed
Copyright: 2016 North Coast Journal
Author: Thadeus Greenson


It was Benjamin Franklin who famously wrote in a 1789 letter that "in 
this world nothing can be said to be certain, except death and 
taxes." Well, California pot farmers have largely skirted the second 
of those for decades and now fear the looming certainty of taxation 
may bring death to their businesses.

The Humboldt County Board of Supervisors is moving forward with 
putting a marijuana excise tax on the November ballot that, if 
passed, promises to bring in millions of dollars in revenue to county 
coffers. Staff recommended a complexly tiered progressive tax that 
would give breaks to small, outdoor farms and operates under the 
basic premise that the larger and more environmentally damaging a 
grow the larger its tax bill.

But at its June 28 board meeting as the Journal went to press, the 
Board of Supervisors voted 4-1, with Supervisor Mark Lovelace 
dissenting, to move forward with a simplified version with lower 
rates. Under the current versions, outdoor grows will be taxed at a 
rate of $1 per square foot of canopy. The rate jumps to $2 per square 
foot for mixed-light grows and $3 per square foot for indoor grows.

Now, this is steep discount from what county staff had originally 
proposed. Consider that under staff's proposal, a 43,580-square-foot 
grow - the largest allowable under the county's ordinance - would 
fetch a tax bill of more than $130,000. Under the version moved 
forward by supervisors, that bill would drop to $43,580.

The trick in this whole conversation, as numerous supervisors noted, 
is finding the sweet spot, or a tax rate low enough to incentivize 
compliance and draw growers out of the black market, yet high enough 
to bring much needed revenues into the county to pay for 
environmental mitigation and county services. Make the rate too low 
and the county is letting much needed revenue - it has an annual 
structural deficit expected to hit $10 million by 2020-2021 by some 
estimates - slip through the cracks. But make the rate too high, and 
the county is either bleeding farmers out of existence or pushing 
them to stay in the black market. But there's also the argument that 
a rock-bottom rate that draws the majority of Humboldt's estimated 
10,000 cannabis farms into compliance and onto the tax rolls is going 
to generate a lot more revenue than a heftier tax with only a 
fraction of farmers in compliance.

And, of course, this conversation isn't taking place in a bubble. 
State law currently sees medical marijuana subject to the state's 7.5 
percent sales tax and there's a concerted effort to implement an 
additional statewide cannabis tax this year. North Coast Sen. Mike 
McGuire's bill, which would have imposed a 15 percent point-of-sale 
fee for marijuana users, has apparently died in committee. But 
another bill by North Coast Assemblyman Jim Wood, which would tax 
cannabis distribution at the rate of $9.25 per ounce, appears to have 
widespread support.

Couple that with the fact that growers - at least those who are 
coming into compliance - are facing a host of new costs, from 
licensing and permit fees to consulting bills and attorney fees, 
while navigating this new landscape, and the picture gets murkier.

But let's go back to that 43,580-square-foot grow for a minute. The 
standard rule of thumb is that 100 square feet of canopy should yield 
a pound of marijuana, which means this garden could reasonably turn 
out 4,358 pounds a year. With a retail price of around $1,000 a 
pound, that means about $4.36 million in gross profit. Under Woods' 
bill, that garden would send $1.13 million to the state in taxes. 
Meanwhile, in Humboldt County, the grower would pay $43,580 in taxes.

As Franklin said centuries ago, taxation is certain, and that's 
proving true even for marijuana farmers. But what that certainty will 
mean - for farmers, consumers, a billion-dollar industry and a poor 
county like Humboldt - is anything but.
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MAP posted-by: Jay Bergstrom