Voters in Los Angeles County approved Measure C, which sets a tax rate for yet-to-come cannabis businesses in unincorporated areas of the county, by a 59% to 41% margin in this week’s midterm election, according to the Los Angeles County Registrar-Recorder/County Clerk.
Today, all cannabis business types are prohibited in unincorporated parts of the county. In February, the Department of Consumer and Business Affairs’ (DCBA) Office of Cannabis Management began the process of developing regulations.
Based on recommendations submitted in December 2021 by the county’s Board of Supervisors, the program will launch “with a low number of licenses (up to 25 retail, 25 delivery, 10 cultivation, 10 manufacturing, 10 distribution, and 10 testing licenses) with a priority for equity applicants.”
In the meantime, the county’s Board approved the tax measure for inclusion in the Nov. 8, 2022 midterm elections—the revenues from which would go toward the county’s General Fund.
According to the DCBA’s website, “If Measure C is approved by voters, cannabis businesses would be taxed at the following rates starting July 2023:
Retail: 4% of gross receiptsManufacturing: 3% of gross receiptsDistribution: 3% of gross receiptsTesting: 1% of gross receiptsCultivation: $7/sf of canopy (indoor artificial light)$4/sf of canopy (mixed light)$4/sf of canopy (outdoor)$2/sf of canopy space (nursery)Any other type of Cannabis Business: 4% of gross receipts.”
The county projects the tax will generate $10.4 million in annual revenue.
The proposed measure would allow the Board to increase or decrease tax rates up to a maximum rate after July 1, 2026. Beginning in July 2027, the maximum annual tax rates will be adjusted annually to reflect the Consumer Price Index.
LA Times, in its endorsement of Measure C, called the tax rate “relatively low,” and touted the benefits of allowing adjustments.
“The built-in flexibility for the Board of Supervisors to make adjustments as the program moves forward is a plus. Consider the alternatives. The board could wait until all possible questions are answered—which they will never be, without actually beginning sales. Or it could keep saying ’no’ to licensed sales altogether. In either case, the result would be more of what we have now: illicit, off-the-books sales and all of the violence, crime and environmental destruction that has made unincorporated Los Angeles County a cannabis nightmare,” according to LA Times.
Comparatively, the city of Los Angeles (in which all cannabis business are permitted) has enacted the following tax rates, according to the Los Angeles Office of Finance.