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Sonoma county approves new tax rates for cannabis businesses

PIX Now -- Tuesday afternoon headlines 5-16-23
PIX Now -- Tuesday afternoon headlines 5-16-23 06:16

SONOMA - The Sonoma County Board of Supervisors gave preliminary approval Tuesday to new business tax rates for cannabis cultivators in unincorporated areas of the county that would nearly double the top rate for indoor growers.

The new rates would maintain the current tax structure on cultivators, which calculates the amount owed based on the square footage of canopy permitted to be grown. 

A third-party consultant hired by the county, HdL Companies, advised changing the tax structure to a gross receipts model, which calculates taxes based on a percentage of revenue. The county's Auditor-Controller-Treasurer-Tax Collector, Erick Roeser, opted to keep the square footage model, but used an estimated rate of 2.5 percent of gross receipts to calculate the new tax rate.

The new rates per square foot of canopy will be $0.75 for outdoor growers, $3.00 for growers using mixed-light, and $12.50 for indoor cultivators. 

Those rates replace what was a complex structure that included ranges even within those three types of growers, with outdoor cultivation rates per square foot between $0.62-$1.24, mixed-light from $1.39-$4.02 and indoor rates between $2.32-$6.96.
The new rules would include an annual review by HdL Companies to determine if the rate should change.

Counties around the state are dealing with an overproduction of cannabis that caused prices to drop by about two-thirds from a peak in 2020, leaving cultivators who were taxed on canopy size, rather than gross receipts, in the position of paying taxes on revenue projections that are no longer accurate.

The state eliminated a cultivation tax last July in response to the changing market conditions.

Sonoma County projects $1.8 million in cannabis tax revenue for both fiscal years 2023-24 and 2024-25 based on the new rates, which will become effective July 1.

The ordinance will come before the board again for final adoption May 23.  

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