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Sonoma County legal weed businesses face hard financial times despite recently reduced tax

As unofficial weed holiday 4/20 looms, some Sonoma County pot businesses struggle
As unofficial weed holiday 4/20 looms, some Sonoma County pot businesses struggle 03:12

Sonoma County supervisors on Tuesday took the unusual step of voting to reduce taxes on cannabis production, recognizing that the industry has hit hard times.  

While the tax cut will help, legal weed growers argue if county legislators really wants pot cultivation businesses to survive, they shouldn't be taxed at all.  

Sonoma County legal pot cultivation
Sonoma County legal pot cultivation KPIX

Erich Pearson ducks into his Glen Ellen cannabis nursery to examine the rows of potted plants used as growing stock for next season's crop.  When his company SPARC began operating, he figured officials were overestimating what the value of cannabis would be to Sonoma County.

"The industry is not the pot of gold that they thought it was in 2016 when they began to contemplate these taxes," said Pearson.

That was acknowledged on Tuesday at the Sonoma County Board of Supervisors meeting.

"I think there had been hope that this tax was going to be something that we could use for other things in the county, and to be able to make improvements," said 5th District Supervisor Lynda Hopkins.

"I mean, originally, this was going to be a cash cow. And it's not," said board chair David Rabbitt. "And that's true for everyone. But be careful what you wish for, I guess."

The supervisors voted to reduce how much they charge cultivators. In Pearson's case, it amounts to about 8%. But cannabis is taxed four times in Sonoma County from the time it's grown to the time it's sold. Pearson said he pays more than $90,000 in taxes for his three acres.  

Meanwhile the hillsides are covered with grapevines that are not taxed at all.

"There is no agricultural crop in Sonoma County that is taxed, except for cannabis," said Pearson.

New local revenue was one of the big selling points for legalization, but when competition caused prices to plummet, the taxes, which remained fixed, began killing off businesses. In May of 2023, there were 155 legal cannabis growers operating in Sonoma County. One year later, there are less than half that many.  

Pearson said those surviving businesses are left, ironically, to compete with those who have returned to the illegal market.

"If they charge us too much money, we can't compete with that. And, by default, they end up supporting the illicit market that they're trying to regulate, or trying to stamp out, essentially," he said. "They shouldn't be taxing us at all. We're doing everything we can to survive."

There may be another reason for getting rid of the taxes completely. It turns out the cost of collection is higher than what little revenues are received. Which means, by taxing the cannabis growers, the county is actually losing money.

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