Elections 2022: Measure C seeks taxes on unincorporated LA County dispensaries

Los Angeles County wants to legalize cannabis sales in unincorporated areas — and, in the meantime, will ask voters to let the agency gain revenue from dispensaries.

Voters around the county will decide whether to approve Measure C, which tax cannabis businesses in unincorporated areas, during the Nov. 8 general election.

The county already plans to initially permit up to 25 storefront retail marijuana businesses, 25 delivery businesses, 10 indoor/mixed light cultivation farms, 10 manufacturing businesses, 10 distribution businesses and 10 testing laboratories by late 2023.

And if voters approve Measure C, LA County would place a 4% tax on retail sales at marijuana dispensaries, beginning July 1, in unincorporated areas of the county, meaning neighborhoods not designated as part of a particular city or town. The tax would expire July 1, 2026.

The county has estimated the tax would bring in $10.4 million annually, money that could be put toward various programs and initiatives to support economic and workforce development, such as the LA County Office of Cannabis Management’s Cannabis Equity Program.

California collected about $817 million in adult-use cannabis tax revenues in fiscal year 2020-21, according to an LA County staff report in August. Revenues have been used on drug research, treatment, enforcement, youth programs and preventing environmental damage from illegal grows.

The county’s Office of Cannabis Management began developing its cannabis equity program earlier this year to provide marijuana entrepreneurs in unincorporated areas equitable access to resources such as initial priority licensing, business development and technical assistance, pro bono legal assistance, access to capital, other potential pathways to jobs, and entrepreneurship and ancillary economic opportunities within and outside the cannabis industry.

The program is meant, according to the county, to address the administrative barriers that create inequitable outcomes, as well as call for investments to bridge the gap in educational, technical and financial resources caused by systemic racism and exacerbated by the so-called “War on Drugs.”

If Measure C passes, cannabis businesses in unincorporated LA County would be taxed at these rates:

4% of gross receipts of retail sales.
3% of gross receipts on manufacturing.
3% of gross receipts on distribution.
1% of gross receipts on testing.
 $7 per square foot of canopy with indoor artificial light cultivation.
$4 per square foot of canopy with mixed light cultivation.
$4 per square foot of canopy cultivated outdoors.
$2 per square foot of canopy space cultivated in nurseries.

These would be some of the lowest rates in the state, according to LA County, and were designed to better promote the viability of legal cannabis businesses.

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The Board of Supervisors, per the measure, could decrease or increase the tax rates at its own discretion after Measure C’s 2026 expiration. An upward change could generate as much as $15.2 million in annual revenues.

Starting with this small amount will allow the county to more easily monitor community impacts and the regulation’s efficacy, officials say, as well as allow them to build the right infrastructure to support the cannabis program’s future expansion.

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