Title
Staff Report for a Resolution Setting the Cannabis Business Tax at 7% of Gross Receipts Until June 30, 2019, and Increasing to 8% of Gross Receipts on July 1, 2019 and 9% of Gross Receipts on July 1, 2021
Staffreport
SUMMARY AND RECOMMENDATIONS
The City Manager recommends that the City Council consider the attached resolution that would set the Cannabis Business Tax rate at 7% of gross receipts. Beginning July 1, 2019, the tax would then automatically increase to 8% of gross receipts, and on July 1, 2021, it would automatically increase to 9% of gross receipts.
BACKGROUND
In November 2016, Measure NN (the "Cannabis Business Tax") was approved by a majority of San Leandro voters, enacting new cannabis business tax provisions as part of Chapter 2-21 of the Municipal Code. The results of this election were subsequently certified by the City Council on December 19, 2016. The provisions of the measure allow the City to impose a tax on all businesses located within the City that make use of any component or derivative of the cannabis plant, at a maximum rate of 10% of gross receipts. Measure NN does not legalize or otherwise permit cannabis businesses in San Leandro and the cannabis business tax is in addition to the annual permit fee that is designed to recover the City's costs in regulating these businesses.
Prior to bringing Measure NN before the voters, City officials and staff declared during various public meetings and community events that the intention of the "up to 10%" language was to provide flexibility in the rate at which the tax would be imposed. Factors supporting such flexibility include:
* ensuring that local cannabis businesses maintain their competiveness with other neighboring communities,
* recognition of the significant up-front costs with starting up a cannabis business, and
* ensuring that the cumulative federal, state, and local taxes imposed on such businesses would not inadvertently incentivize a black market.
Below is...
Click here for full text