The new rates, which still require a second board vote, are expected to go into effect on July 1.
Sonoma County officials took another step to deliver tax relief to struggling marijuana growers, as the number of licensed cultivators shrank by almost two-thirds under the burden of hefty state and local taxes.
The County Board of Supervisors this week approved lowering the gross receipts tax to just 2.5% for legal cannabis growers, a reduction of 45%, The Press Democrat reported.
The move came in response to industry pressure, as businesses warn that many are on the brink of moving back into the underground market just to survive. The number of licensed cultivators in Sonoma County has plummeted to just 66 from 155 in May 2023, The Press Democrat noted.
The tax rate for outdoor growers will be slashed to 36 cents per square foot of cultivation canopy from its current rate of 69 cents, The Press Democrat reported, while rates for mixed-light cultivators decrease to $1.15 per square foot from $2.51, and indoor growers will see their rates decrease to $3 from $7.58. The rates will go into effect July 1 after a second board vote to confirm the ordinance’s passage.
The move is the fourth adjustment in the county’s cannabis tax rate since it was established in 2017, and it’s the first time the board has moved to permanently reduce rates. A previous rate reduction in 2022 was temporary.
The move is intended to help stabilize the local cannabis industry, a county marijuana program official told the board, who cited broadly decreasing wholesale prices for cannabis growers in California. The average price per pound of outdoor-grown marijuana flower, the board was told, has plummeted to $143 per pound from $277 a year ago, while indoor flower goes for just $240 a pound, down from $606 a year prior.
Sonoma County is the latest in a string of California localities to cut taxes on struggling marijuana companies in recent years. The Southern California cannabis-friendly town of Desert Hot Springs is also weighing another cannabis business tax cut this month to help dispensaries, to 5% of gross receipts from the current 10%, KESQ reported this week. The city’s mayor even threw his support behind the tax cut.
The move also comes amid a backdrop of fear by California cannabis companies heading into the summer, given that state marijuana taxes are set to increase on July 1, from a 15% excise tax rate to 19%, unless the legislature takes action to forestall the hike.
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