Calaveras County voters will be given the opportunity in the Nov. 3 General Election to weigh in on whether changes should be made to how commercial cannabis cultivation is taxed in the county.
The Calaveras County Board of Supervisors needed a four-fifths vote Tuesday to put a measure on the ballot with proposed amendments to Chapter 3.56 of the Calaveras County Code of Ordinances. They voted unanimously in favor on a motion put forward by District 4 Supervisor Dennis Mills and a second by District 2 Supervisor Jack Garamendi.
Supervisors passed a cultivation ordinance in October of 2019 on a split 3-2 vote, with Mills and District 1 Supervisor Gary Tofanelli dissenting.
It’s been four years since the board last visited tax structures for cannabis, according to Greg Wayland, interim director of the county’s Division of Cannabis Control.
The changes include taxing cultivation by canopy, or square foot, rather than by dry weight of the crop; establishing a tax rate of $2 for outdoor, $3 for mixed light and $4 for indoor cultivation; and setting maximum tax rates of $7 per square foot for cultivation and a maximum 8% gross proceeds tax on all other cannabis activities, according Wayland’s presentation to supervisors Tuesday.
The gross receipts tax would apply to nurseries and all other cannabis tax activities, starting at 2% and 5% respectively.
Other cannabis activities include any licensing types the county has already allowed – cultivation and retail – or may authorize in the future, such as manufacturing, distributing and testing.
Starting on Jan. 1, 2022, the board could, by ordinance, raise the cultivation rate by $1 per year for cultivation permits and 1% per year for the gross receipts tax on other cannabis activities, according to Wayland.
Wayland’s presentation showed that current outdoor cultivation permits collectively amount to 675,160 square feet, mixed light permits include 119,780 square feet and indoor permits include 1,250 square feet.
If the ordinance is adopted with those amounts, the revenues generated would be in excess of $1.7 million, and could be higher depending on the number of new permittees, based on Wayland’s estimations.
Revisions to the tax code are “intended to make this efficient and have safeguards built-in so we have a more efficient and predictable process,” Wayland said. “It’s fairer for the industry and better for the county.”
The tentative ballot measure, which would go into effect Jan. 1, 2021, if approved, reads, “To improve essential County services including road maintenance, crime prevention and environmental regulation, shall the measure establishing maximum cannabis activities tax rates not to exceed $7 per square foot for cultivation canopy area and 8% of gross receipts for all other cannabis activities, in unincorporated Calaveras County, generating an estimated $1.5 - $3 million annually, unless/until repealed, with financial audits, and all funds used locally, be adopted?”
Revenues generated from the tax would be discretionary, but they could allow the county to recover costs associated with issuing permits, inspections, compliance monitoring and more, according to Wayland.
The tax revenues could also cover expenses related to code enforcement; law enforcement; environmental regulations and mitigation; and health and education impacts, among other costs not directly related to permittee services.
“The primary objective is to modernize the cannabis activity tax,” Wayland told the Enterprise in a phone interview. “It was important to the board to strike a balance so the industry is helping support vital services and (the county is providing) needed regulation for the local industry.”
Supervisors said they were generally in favor of the revisions to the ordinance, but expressed a few concerns.
Mills asked if the ordinance would bring new work to the tax assessor’s office, given requirements for audits of permittees.
Wayland responded that cannabis control staff would be supporting the tax assessor in conducting those audits.
Garamendi said he appreciated that “as a taxing entity, we know what we’re going to get, which is going to make it easier for anybody. I want to commend my colleagues who were not looking forward to bringing cannabis back but are working hard to figure out how, if we’re going to bring it back, we’re going to do it correctly.”