Board of Supervisors adopts temporary 45 percent reduction of local cannabis cultivation tax rates

The County of Sonoma Board of Supervisors this week agreed to amend the Cannabis Business Tax ordinance to reduce the fiscal year 2021-2022 cannabis cultivation tax rates by 45 percent through June 30, 2023. The reduced rates will be retroactive to July 1, 2021 and are intended to mitigate financial hardship for local operators. 

The county revenue loss from the tax reduction will be offset by a current and projected county cannabis tax revenue surplus in excess of program operating costs. County tax revenue collected in fiscal year 2020-2021 from 183 permitted cannabis operators has totaled $3,634,230, compared to $2 million in estimated annual operating costs.  

“We were putting people out of business with our policy, so this is the right thing to do,” said District 4 Supervisor James Gore, Chair of the Board of Supervisors. “The reduced cultivation tax rates are needed to account for changes in the market and our Board’s policy direction. The revenue surplus in our cannabis program will support operational costs for two years as we transition to a new tax model and policy framework. We’re committed to getting this issue right for Sonoma County, and that means continuing to work between neighborhoods and industry advocates, learning from other counties, and finding local solutions that are fair and sustainable for both communities and the environment.”  

On April 5, county staff will present an amended ordinance reflecting the tax policy decision, as well as a resolution extending the January 31 and April 30 due date to May 31 for cultivation tax payments. The Board previously extended the January 31 tax installment due date for all cannabis taxes to April 30, 2022. 

The Board also directed county staff to review the pros and cons of transitioning to a cultivation gross receipt tax structure from a square footage tax assessment, with the goal of implementing a new system by July 1, 2023, depending on findings of staff analysis and a quarterly program financial report. 

Based on public feedback related to the state tax burden on the cannabis industry, the Board committed to communicating their support for state cannabis tax reform, as well as their support for SB 1074, which would discontinue the state cannabis cultivation tax and increase the state cannabis excise tax. The Board predicated its support for both efforts on the state’s ability to maintain state tax revenue funding for children’s programs.

Separate from the tax discussion, the Board of Supervisors also approved a resolution of intention to adopt a cannabis program framework based on 16 guiding tenets designed to inform the preparation of General Plan amendments and the Environmental Impact Report required to update the Cannabis Land Use Ordinance and related regulations. On June 8, 2021, the Board directed staff to complete a comprehensive update of the cannabis program based on previous and ongoing community input. To date, there have been eight public workshops, 12 small group outreach sessions and a countywide survey.

All public materials related to the local cannabis cultivation tax rates discussion are available here:
https://sonoma-county.legistar.com/LegislationDetail.aspx?ID=5518512&GUID=ED2370E5-14B8-4ED4-B8B0-596BD0C13C4C

All public materials related to the proposed cannabis program framework update are available here:
https://sonoma-county.legistar.com/LegislationDetail.aspx?ID=5518510&GUID=4652F55D-DC01-4CE0-9301-6244D3E9A491

For more information about the Sonoma County Cannabis Program, please call (707) 565-2431, email Cannabis@Sonoma-County.org or visit https://sonomacounty.ca.gov/cannabis-program/.