City sets cannabis tax rates

CALEXICO – The City Council here recently adopted cannabis tax rates that officials described as comparable to existing industry rates and which are projected to raise about $700,000 annually.

The approved rates establish a tax of $16 per square foot for cultivation facilities, 3 percent of gross receipts for manufacturing facilities and a 10 percent tax on retail operations such as dispensaries and delivery businesses.

The rates were approved by the four-member City Council during its Jan. 9 regular meeting and are substantially less that the maximum rates authorized by a recent voter-approved tax measure.

The city’s adopted tax schedule also refrains from taxing cannabis distributors, since most cultivation and/or manufacturing operations also obtain distribution licenses.

Similarly, testing laboratories will not be subject to any tax, since such facilities are not taxed by the state, according to the city’s staff report accompanying the Jan. 9 agenda item.

The approved tax rate schedule represents figures that are based on statewide market values and a comparative analysis of existing rates within the region, said Assistant City Manager Miguel Figueroa during the Jan. 9 council meeting.

“We feel it’s a win-win,” Figueroa said. “(The rates) won’t strangle industry, and at the same time, the city is compensated fairly.”

The approved tax rates, which went into effect immediately, were substantially less that the maximum rates authorized by a recent voter-approved measure.

In November 2018, Calexico voters had approved maximum tax rates of 15 percent on gross sales and up to $25 per square foot of space used for cannabis businesses.

The recently approved rates also closely reflect rates previously proposed by the county Board of Supervisors and approved by voters in June 2018.

The cannabis tax rates established for the county’s unincorporated areas include a maximum rate of $15 per square foot on space utilized for cannabis cultivation, a 5 percent tax on gross receipts for manufacturing facilities and 8 percent of gross receipts of cannabis retail operations.