Cannabis Conversation: Cannabis Taxation for Nevada County

February 26, 2018 – Last week the Board of Supervisors adopted their 2018 Board Objectives which included an objective to “Continue to develop long term County cannabis regulations and explore a cannabis revenue measure for the November Ballot.” In addition, the Board provided initial direction to County Counsel to begin drafting a revised cannabis ordinance, which would allow for medical commercial cannabis cultivation.

Nine other counties and more than sixty cities in California have implemented taxes on cannabis businesses in order to generate revenue for enforcement, public education, and other projects.  With the direction received from the Board last week, County staff are ready to start exploring a ballot measure to do the same for the unincorporated areas of Nevada County.  Nevada City is preparing a cannabis tax measure for the June 2018 ballot.

Cannabis business taxes are generally applied to both cultivation and other related businesses (manufacturers, retailers, etc) and to both medicinal and adult use (recreational) products. Tax rates are typically structured based on the cultivation area size (by square footage) or by gross receipts.  The State of California imposed a weight based tax on cultivators ($9.25/dry ounce of flowers) as well as a 15% gross receipt tax on all supply chain businesses, regardless of medicinal or recreational designation. The State’s Track and Trace system will monitor all cannabis products from plant to flower to oil (or other manufactured items) in order to ensure product safety, source legality, and accurate tax collection.

While County Counsel drafts the new cannabis ordinance, County staff will also be analyzing the anticipated workload of implementing the proposed changes.  Permit fees will be proposed based on the amount of staff time anticipated to process cannabis related permits, similar to building permits. Enforcement and administrative costs will also be analyzed, however these costs cannot be added to permit fees, necessitating an additional revenue source such as a cannabis business tax.

The Cannabis Conversation will continue with anticipated items coming to the Board of Supervisors in March.  For more information, visit the County’s Cannabis Conversation website.