Cannabis Tax

San Francisco Makes a Move to Suspend Cannabis Business Tax to Curb the Illegal Cannabis Market

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The San Francisco Board of Supervisors last week unanimously approved a plan to temporarily suspend the city’s Cannabis Business Tax. This was done to reduce competition from the illicit cannabis industry and to sustain the regulated industry in the face of a crime wave that is plaguing it.

The Cannabis Business Tax was approved by San Francisco voters in 2018 and was scheduled to go into effect on January 1, 2022. Under its terms, a tax of 1% to 5% would be levied on the total receipts of the city’s licensed cannabis businesses.

Supervisor Rafael Mandelman said that suspending that tax would allow cannabis businesses in the city to compete better with unlicensed operators, who paid no taxes and were not subject to charges like licensing fees and lab testing expenses.

Also Read: All CBD Products to be Federally Controlled and Regulated with a Newly Proposed Hemp Bill

He added that though cannabis businesses created jobs for San Franciscans and provided safe and regulated products to customers, the illegal market was flourishing by undercutting the prices of legal businesses.

This is bad for the country’s economy as illegal businesses pay no taxes and subject their workers to dangerous conditions and consumers to dangerous products. So, small businesses that are just getting established should not be burdened with a new tax while they are trying to compete with illicit operators and survive.

Mandelman noted that a report from the California Legislative Analyst’s Office found that increased state tax rates were directly related to illegal cannabis sales. Matt Hawkins, founder of Entourage Effect Capital and chairman of the board for California licensed cannabis operator Harborside, commended the city’s move to help regulated businesses compete with the illicit ones.

In an email to High Times, Hawkins lauded the city of San Francisco for suspending the city’s Cannabis Business Tax. He explained that since the majority of California’s cannabis sales were coming from the illicit market, the tax suspension should help the legal cannabis operators in the area.

He expressed his hope that the rest of California’s municipalities would also follow suit, including Oakland and others in the Bay Area region.

California Cannabis Businesses Plagued by Crime

Cannabis businesses in California, particularly in the San Francisco Bay Area, have suffered from a string of crimes over the past two years. The civil unrest in the nation after the death of George Floyd at the hands of Minneapolis police in May last year further fanned it.

Criminals looted and burned cannabis businesses all across the state by using the protests as a cover.

Cannabis dispensaries have also been subject to dispensary thefts and robberies. On November 16, a group of armed thieves stole thousands of dollars of merchandise from San Francisco retailer BASA. According to Mandelman’s office, the theft was the fifth burglary at that site.

Mandelman said that cannabis businesses, along with many other retailers in San Francisco, were struggling under the weight of out-of-control retail theft. According to Mandelman, San Francisco needs to do more to protect these businesses, their employees, and their customers before imposing a new tax on them.

Also Read: Two Ohio Republican Lawmakers File New Bill to Legalize Marijuana in the State

Sue Taylor, the founder of Mama Sue Wellness and a representative for Glass House Brands, noted that reducing cannabis taxes provided a benefit to both consumers and businesses. She told High Times that San Francisco was taking the lead in helping those in pain by lowering cannabis taxes because many of them had slipped into the illicit market to buy cannabis because of the pricing.

She added that before full legalization, cannabis was affordable, but since then the costs had almost doubled. She thanked the city for understanding the importance of the issue and expressed her pride in being a member of that community.

A Bold Move for San Francisco

Mandelman said that since the measure to suspend the Cannabis Business Tax was approved, his office would work with the City Controller’s Office, the Treasurer and Tax Collector’s Office, the Office of Cannabis, and other concerned parties to analyze cannabis business sales in San Francisco.

The information would then be used to develop a new tax rate and structure plan to be presented to the Board of Supervisors for implementation in 2023.

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