The San Luis Obispo City Council formally adopted an ordinance allowing marijuana businesses on Tuesday and then proceeded with preparations to place a cannabis business tax measure on the November ballot.
San Luis Obispo’s new ordinance allows up to three brick and mortar pot shops to open in the city. The ordinance, a first of its kind in SLO County, permits both medical and recreational marijuana businesses, which include delivery services and some types of pot manufacturing, in addition to brick and mortar shops.
However, the ordinance contains a provision stating marijuana business operations will not be allowed in the city until voters approve a cannabis business tax. The city’s proposed tax initiative would consist of a gross receipts tax of up to 10 percent and a cultivation tax of up to $10 per canopy square foot.
Gross receipts pot taxes are assessed at every stage of marijuana production, including retail sales, testing, manufacturing and distribution. Cultivation taxes are assessed based on the size of the pot canopy or the growers’ license issued by the state.
The city’s proposed rates reflect the maximum allowable pot tax rates under California’s new marijuana regulatory scheme. At least initially, San Luis Obispo officials plan to keep the rates lower than the maximums.
Under the proposed initiative, the city council would hold the power to adjust the city’s pot business tax rates. City staff estimates the proposed taxes could raise an estimated $1.5 million a year.
If the city voters approve the initiative, the two taxes would be levied on top of an existing state gross receipts tax of 15 percent and a cultivation tax of up to $9.25 an ounce.
Some council members on Tuesday expressed concern that the high taxes could drive marijuana business activity into other cities or the black market.
The council is expected to formally decide at its June 5 meeting to place the tax measure on the ballot. The tax initiative would then go to voters in Nov. 2018.