Pubdate: Thu, 28 Jul 2016
Source: Press Democrat, The (Santa Rosa, CA)
Copyright: 2016 The Press Democrat
Contact:  http://www.pressdemocrat.com/
Details: http://www.mapinc.org/media/348
Author: Clark Mason

CLOVERDALE LOOKING TO IMPOSE MARIJUANA BUSINESS TAX

Cloverdale this week took the penultimate step to becoming the first 
city in Sonoma County to impose a local tax on marijuana-related businesses.

With medical marijuana becoming more regulated and with the 
likelihood California voters will legalize pot in November, 
Cloverdale is looking to capture some of the revenue to bolster its 
anemic budget.

The City Council on Tuesday informally agreed to place a measure on 
the November ballot asking voters to approve a tax on cannabis 
operations to benefit the city's general fund to pay for essential 
services such as police, streets, parks, libraries, senior and youth programs.

The council is scheduled Aug. 9 to formally place the measure on the ballot.

The city currently prohibits medical marijuana dispensaries and 
commercial medical marijuana activity, but that's expected to change 
if voters give a green light to the cannabis tax.

Speakers at Tuesday's meeting voiced support for the tax, but also 
urged the council to proceed slowly with the number of businesses 
that could be permitted.

"It's incumbent upon us to make sure we don't have a marijuana shop 
every other door," said Councilman Gus Wolter.

While it's unclear how much revenue the maximum 10 percent tax on 
gross sales would raise, city officials estimate it could be $150,000 
annually from just one dispensary.

Mayor Mary Ann Brigham said it's possible a couple of dispensaries 
might be allowed, although it's still to be determined whether they 
would go downtown, or in a commercial area.

The city is also looking at imposing the tax on commercial 
cultivation operations, distribution, delivery and testing businesses.

For a city with an approximate $5 million general fund and paltry 
reserves, the cannabis tax represents a potentially significant 
source of revenue.

City Manager Paul Cayler said no one knows how big the marijuana 
industry is, or how many businesses could be established in the city.

"There is a huge market for marijuana that exists in this region," 
Cloverdale resident Steve Nurse told the council, adding there is an 
existing distribution and marketing network and "huge customer base."

City officials on Tuesday weighed how to collect the taxes from 
growers and distributors who tend to operate on a cash basis because 
federal banking regulations treat marijuana proceeds as illegal gains.

City Attorney Jose Sanchez said the tax would likely be collected in 
monthly payments, with the city meeting cannabis business 
representatives at the bank, where presumably the money would be 
transferred into a city account.

There are at least 18 cities in California with cannabis taxes on the 
books, according to a report compiled by Cloverdale officials.

Some cities have a tax in place, but don't levy it because they don't 
allow marijuana businesses. And some municipalities only tax dispensary sales.

Council members agreed the tax on gross sales could be as high as 10 
percent but there would be a sliding scale, depending on the type of business.

In some cases, a retail operation like a dispensary could pay the 10 
percent business tax, plus an 8.25 percent sales tax.

The state, which also is implementing a comprehensive system 
governing marijuana businesses, approved an additional 15 percent 
excise tax on medical marijuana, which would apply to recreational 
marijuana as well, if adult use is legalized.

"There is a great fear among supporters of cannabis enterprise that 
everyone will pile on state and local taxes," Cayler said Wednesday. 
"Medical marijuana advocates want to become legal. They want to come 
in out of the dark," he said, adding that if taxes are too high, 
people will continue to operate through the black market.

Councilman Wolter suggested last month that medical marijuana should 
be treated differently when it comes to taxation.

"I'm not sure I like taxing someone who uses it as medicine, versus 
someone who uses it as recreational," he said. "There should be 
somewhat of a distinction."

While speakers at council meetings generally have voiced support for 
the cannabis tax, there was one dissenter Tuesday who worried 
cannabis businesses will simply set up shop outside city limits to 
avoid the tax.

But Councilman Wolter said the county is also expected to eventually 
impose a cannabis tax.

Councilman Joe Palla said it is important for Cloverdale to get a tax 
in place, which can be reviewed after the county and other cities 
impose cannabis taxes, as anticipated.

In Mendocino County, voters will see two competing marijuana tax 
initiatives on the November ballot.
- ---
MAP posted-by: Jay Bergstrom