San Francisco supervisors on Tuesday unanimously voted to suspend the city’s Cannabis Business Tax through the end of 2022. That move is an attempt to curb untaxed illegal marijuana sales, reports CBS SF.
According to Supervisor Rafael Mandelman, author of the ordinance, suspending the city business tax through Dec. 31, 2022, will aid legal marijuana retailers as they struggle to compete with off-the-grid cannabis.
San Francisco voters approved the pot tax in Nov. 2018.
The ordinance imposes a 1 percent to 5 percent citywide tax on gross receipts from cannabis businesses. The tax was set to go into effect on Jan. 1, 2022.
Untaxed Marijuana Market Is Flourishing
“Cannabis businesses create good jobs for San Franciscans and provide safe, regulated products to their customers,” Mandelman said.
“Sadly, the illegal market is flourishing by undercutting the prices of legal businesses, which is bad for our economy as illegal businesses pay no taxes while subjecting workers to dangerous conditions and consumers to dangerous products,” he said. That means, he said, that the timing just isn’t right. “Now is not the time to impose a new tax on small businesses that are just getting established and trying to compete with illicit operators,” the supervisor added.
Mandelman cited a Dec. 19 report from the California Legislative Analyst’s Office. Increased state cannabis tax rates frequently result in illegal marijuana sales, according to that report.
‘Out-of-Control Retail Theft’
In addition to the untaxed sales, increased theft and armed robbery are also creating big problems for marijuana stores.
For example, on Nov. 16, an armed group stole thousands of dollars’ worth of merchandise from cannabis retailer BASA, located on Grove Street. The burglary was the fifth at the location, according to Mandelman’s office.
“Cannabis businesses, along with many other retailers in San Francisco, are struggling under the weight of out-of-control retail theft,” Mandelman said. “San Francisco needs to do more to protect these businesses, their employees, and their customers before we hit them with a new tax.”
New Cannabis Tax Rate Coming To San Francisco In 2023?
Mandelman said his office will next work with the City Controller’s Office, the Treasurer and Tax Collector’s Office, and the Office of Cannabis, along with other stakeholders. Together, they’ll then analyze data on cannabis business sales in the city, he said.
The goal is to craft a set of recommendations on tax rate and structure for cannabis retailers. Then, they will present that to the Board of Supervisors and implement a new plan for 2023.