This measure seeks voter approval to allow the City of San Diego to impose a new Cannabis Business Tax of up to 15% on the gross receipts of non-medical (recreational) cannabis businesses operating in the City. Cannabis is also known as marijuana.
This tax would be imposed only if such businesses become legal in the State of California, if California voters also approve Proposition 64, the Marijuana Legalization Initiative Statute, on the November 8, 2016 statewide ballot.
Existing state law does not authorize the sale of non-medical cannabis. This measure does not permit businesses to engage in activities that are otherwise illegal. The City also does not currently permit non-medical cannabis businesses to locate or operate in the City.
If approved by voters, the City measure would amend the San Diego Municipal Code by adding a new Article 4 to Chapter 3 of the San Diego Municipal Code to allow the City to impose the tax.
Cannabis businesses are defined in the ordinance as businesses involved in the distribution, delivery, dispensing, exchanging, bartering or sale of cannabis. This includes transporting, manufacturing, cultivating, compounding, converting, processing, preparing, storing, packaging, and wholesale or retail sales of cannabis and cannabis products.
Medical marijuana consumer cooperatives licensed by the City would be exempt from the cannabis business tax, as would certain transactions involving patients and primary caregivers under the Compassionate Use Act.
Gross receipts is generally defined as the total revenue or compensation received by a cannabis business without any deduction for the cost of operating the business.
The maximum tax rate permitted by the measure would be 15%. Upon the effective date of the ordinance, the tax rate would be set at 5%, increasing to 8% on July 1, 2019. The City Council may, by ordinance, decrease or increase the tax rate at any time thereafter.
The ordinance includes provisions specifying how the tax administrator, the City Treasurer, would issue cannabis business tax certificates and collect the tax, which would be remitted by cannabis businesses to the City on a monthly basis. The measure also includes provisions for handling delinquencies, penalties, appeals and for the enforcement of the taxing provisions.
If approved by voters, the ordinance could be amended by the City Council so long as amendments do not raise the maximum tax rate in excess of 15% of gross receipts and do not tax businesses or activities that were previously not subject to the tax.
It is not possible to calculate the amount of revenue that could be generated by the tax as it is unknown how many businesses will be allowed to operate in the City, nor is it possible to estimate their gross receipts. If imposed, the tax would continue indefinitely unless it is repealed by the City Council or the voters.