Santa Barbara County staff to develop alternate cannabis tax measure | Government and Politics
Santa Barbara County may change its method of taxing cannabis cultivators provided a number of “ifs” are met — if the Board of Supervisors can agree on certain specifics and four-fifths of them vote to place a measure on the ballot, and if a majority of county residents approve the measure.
Supervisors voted 4-1 Tuesday to have staff develop a hybrid tax system combining the current method based on gross sales with a scheme based on the square footage of the operation.
The vote included having the staff use numbers suggested by County Executive Officer Mona Miyasato that supervisors can use as a starting point for discussion when the proposed measure is brought back for a first reading at the June 18 meeting.
Chairman and 5th District Supervisor Steve Lavagnino dissented in the vote, arguing the current method is the best for maximizing revenue and has the tools necessary to address underpayment of taxes.
Lavagnino argued that the board has yet to receive a report on a tax audit currently being conducted by a consultant and cultivators who are paying 80% of the cannabis taxes are asking the board not to change the system.
“There is no perfect option,” Lavagnino said. “Each option creates its own gray areas and drawbacks.”
He moved to do nothing to change the taxation method and to keep the current system, but it died for lack of a second.
Lavagnino pointed out voters approved the current system, which has brought in more than $50 million in tax revenues over the last five years.
“We’re the county leaders on collecting revenue,” Lavagnino said, referring to cannabis taxes in other counties.
He also noted another tax proposal — apparently to raise the transient occupancy tax rate — may be on the November ballot, and having two tax measures could lead to both of them failing.
Lavagnino also opposed the idea of making the tax rate flexible, meaning adopting a range of rates that would allow the board to change it without going to a public vote, which he said could kill an industry if supervisors make quick decisions that are not well thought out and change the rate too often.
But 2nd District Supervisor Laura Capps countered that the county is producing the most tax revenue because its cultivators are producing the most product.
“I don’t think the system is working as well as it could,” Capps said, adding a lot of operators believe there is a lack of fairness in the process. “I do believe we’re at a point where action is important. I just say, let’s give this a shot. I don’t think doing status quo is the best thing we can do.”
Fourth District Supervisor Joan Hartmann raised the idea of a hybrid system at the March 12 meeting, when the board directed staff to bring back some options for as an alternate cannabis tax structure.
The board’s goal in developing an alternate tax structure was to make sure all growers are paying their fair share of taxes and not undervaluing transfers among operations owned by the same company to reduce their tax burden.
Lavagnino doubted the square-footage system would accomplish that goal.
The hybrid developed by staff would set a base tax rate, referred to as an “activity” rate, of 10 cents a square foot for outdoor cultivation and $1 a square foot for indoor cultivation; the operator would then pay tax on whichever is greater, the square footage figure or the existing 4% of gross sales receipts.
To satisfy concerns raised by 1st District Supervisor Das Williams and 4th District Supervisor Bob Nelson, the proposed tax ordinance would limit the board to changing the rate every two years, with a maximum change of $2.50 for indoor grows and 75 cents for outdoor grows and a four-fifths vote required.
“Activity” would be defined as “harvest,” and the staff may look at how to tax vertically integrated operations — for example, nursery, cultivation and processing licenses — to avoid a double taxation Williams was most concerned with.
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