The Santa Barbara County Board of Supervisors is set to consider cannabis taxation options when it convenes this morning.
The board is presented with three options:
— Develop a tax structure for cultivation area by square foot,
— Develop a hybrid tax structure with a minimum tax on cultivation set by square footage.
— Maintain the current taxation method by directing staff to amend the Chapter 50A ordinance for clarification and compliance.
According to an agenda report ahead of the board meeting, the first option — a tax structure for cultivation area by square foot — is the most common method utilized by local jurisdictions. Albeit, “many California counties are actively pursuing efforts to move away from this model,” the report said.
Given state cultivation and excise taxes as well as a lack of flexibility for market fluctuations, a flat tax rate based on cultivation area could result in more taxes being owed than revenue brought in, according to the report.
However, this option could provide more certainty for annual revenue projections and could be more easily monitored for tax compliance.
In a letter already submitted to the board, the Coalition for Responsible Cannabis has backed the flat tax rate per square foot. It said a suggested tax rate of $3 per foot of indoor and mixed light canopy and $1 per square foot of outdoor canopy would be “appropriate.”
“Among the options, only Option #1 holds the potential to increase revenues with greater predictability, provide certainty to operators and public transparency, and enhance oversight and verification of cultivation taxation,” Blair Pence, president of the nonprofit, said. “It also substantially reduces the costs and complexities of County oversight of the taxation of cannabis.”
The hybrid option would establish an annual minimum payment based on the county-permitted cultivation area and would apply to every operator in the acreage gap regardless of whether cannabis is grown on the property.
This option is perceived to be more equitable and a balanced tax system and ensures every operator holding acreage in the cap contributes a minimum amount of taxes, according to the agenda report.
However, it relies on operator inputs and self-reporting and may be difficult to establish a minimum tax rate with limited information.
Santa Barbara County is in the midst of working with a consultant on cannabis financial monitoring and audit services while the Treasurer-Tax Collector’s Office will administer the contract and review the audit’s findings. This could impact how Chapter 50A is administered, according to the agenda report.
If the current taxation model is what is chosen, this could allow for clarifying language to be added to the ordinance and enhance data collection for future analysis, according to the report.
However, this could result in less certain annual revenue projections and exempt certain operators that do not grow or have taxable transfers, the report said.
The board of supervisors instructed staff to provide cannabis taxation options during its budget workshops last month.
Additionally today, the Santa Barbara County Board of Supervisors is expected to hear recommendations stemming from a Santa Maria River Levee Trail study.
Today’s meeting is scheduled to begin at 9 a.m. and will be held at the County Administration Building at 105 East Anapamu St. in Santa Barbara.
It can also be viewed online at www.countyofsb.org.