Update: On March 25, these bills were HELD from a vote because of a lack of necessary support for passage. The legislation could be rescheduled in May.
This is the first in a series of posts which will focus on particular sections and provisions of interest to local governments in S2703, legislation which will legalize the adult use of recreational cannabis. The legislation is scheduled for final votes in both the Assembly and Senate on Monday, March 25.
According to press accounts, however, final passage is far from certain.
Section 21. Local Cannabis Taxation; Local Cannabis Transfer Tax and User Tax, Pages 54-56.
This section authorizes municipalities to adopt ordinances imposing a “transfer tax” on cannabis sales on licensed cannabis establishments (see definition in Section 3, page 4, lines 13-16).
Municipalities may enact a local tax up to:
- 2% of the receipts from each sale by a cannabis grower, cultivators (Class 1 license);
- 2% of the receipts from each sale by a cannabis processor (Class 2 license);
- 1% of the receipts from each sale by a cannabis wholesaler (Class 3 license); and/or,
- 3% of the receipts from each sale by a cannabis retailer (Class 4).
Thus, the municipality may enact the appropriate transfer tax on any of the licensed cannabis establishments located in the municipality.
These taxes are in addition to the State cannabis excise tax of $42 per ounce. Please note that no local transfer/user tax can be imposed on medical marijuana.
Per Section 22 (starting on page 56, which will be subject of a later post), the municipality may prohibit any or all of the 4 licenses within 180 days of the effective date of the Act.
For those who do not opt out, the local tax ordinance shall also include provisions for imposing a user tax, at the equivalent rate(s) set by the municipality, on any “concurrent license holder…operating more than one cannabis establishment.” This language clarifies earlier concerns about the tax on businesses that holds more than one license within the municipality, commonly referred to as a vertically integrated operation.
Receipts from the transfer and user taxes shall be remitted by the cannabis establishment directly to the Chief Financial Officer of the municipality, in a matter proscribed by the municipality.
If there is nonpayment of the transfer/user tax, then the unpaid balance and accrued interest shall be a lien in the same manner as other unpaid municipal taxes, fees and charges.
Michael F. Cerra, Assistant Executive Director
firstname.lastname@example.org; 609-695-3481 x120