How much will the cannabis business excise tax generate on an annual basis?
Based on a conservative fiscal analysis prepared by the City’s cannabis consultant, the cannabis business excise tax is expected to generate an estimated $210,000 in unrestricted general revenue annually. The revenue depends on the type and number of commercial cannabis operator permits that are issued.
How will this tax benefit the City?
This tax has the potential to generate an estimated $210,000 in unrestricted general revenue annually to support essential City services. Essential City services include funding for police patrols, fire library and recreational programs and other general city services.
Is this a tax on cannabis users?
No. The cannabis business tax is an excise tax imposed on commercial cannabis operations for the privilege of operating a cannabis business in the City. The proposed tax is not a sales tax and would not be imposed directly on cannabis users or consumers.
Is this tax something all cities are considering?
Cities that have approved permitting cannabis businesses in their jurisdictions typically consider some form of a cannabis tax.
What cannabis business types are allowed in Redwood City?
The types of cannabis businesses currently allowed in Redwood City are:
1. Cannabis Nursery Businesses
Nurseries are defined as producing only clones, immature plants, and seeds and other agricultural products specifically for planting and propagation. A nursery producing seed for distribution may contain mature plants, but all products, except seed, derived from these plants are prohibited from entering the commercial distribution chain. A nursery may maintain a research and development area for the cultivation of mature plants, but all products derived from these plants are prohibited from entering the commercial distribution chain.
Delivery centers allow for storage of cannabis products, call centers to receive orders, and deliveries directly to customers. Individual customers would be prohibited from buying cannabis products “over the counter” similar to a retail use. The state regulates this as a “non-storefront retail” business.
* Non-local retailers delivering into Redwood City is permitted and would be subject to the City’s cannabis business excise tax.
What is a Cannabis Business Excise Tax?
All medical and non-medical cannabis retail sales are subject to a 15% state excise tax, in addition to regular state and local sales tax (currently 8.75%) that applies to non-medical cannabis retail sales. The City may impose additional excise taxes on businesses that are cultivating, manufacturing, processing, selling, distributing, providing, storing, or donating medical or non-medical cannabis. There are three types of activities permitted in the City (all three of which are subject to tax under the measure): nursery businesses, delivery centers, and deliveries from retailers located outside of the City. Cannabis cultivated for personal use is exempt from taxation. In order for the City to impose a new tax on cannabis businesses operating in the City, the City needs to seek voter approval.
Under the measure, cannabis businesses operating in the City would be subject to the cannabis business license excise tax based on gross receipts. Cannabis operations, whether existing, newly established, licensed, or unlicensed would be required to pay the full tax imposed by the measure.
The measure would provide the City the right to audit all books and records of the cannabis operation, impose penalties and interest for failure to pay the tax, and provide enforcement mechanisms for the City.
Where can I find out more about this tax?
To learn more about the proposed cannabis business excise tax go here.