California: Marijuana businesses ask Costa Mesa to allow delivery, lower taxes from 6% to 2%

The OC Register reports…..

Costa Mesa’s cannabis businesses are asking the city to lower its tax on their operations and allow for home delivery to help them be more competitive.

The City Council recently formed an ad hoc committee to study the request and the city’s regulations related to the industry in Costa Mesa.

Mayor Katrina Foley said the committee, which will include herself and councilmen John Stephens and Manuel Chavez, will meet beginning in January with the plan to have recommendations ready for the entire council to consider by the end of spring. The timing is intended to leave room to get an item on the November ballot if necessary.

“This is not just about the taxes,” Foley said. “This also is about whether or not we have the right as the council to vote on delivery issues.”

Foley said delivery operations are happening in town – without city regulation – and officials are still playing “whack-a-mole” with illegal dispensaries. “We are going to look at those issues.”

Measure X, approved by voters in 2016, allowed marijuana-related businesses engaged in manufacturing, testing and distribution, but not sales, in a “Green Zone” made up by the city’s industrial zone north of the 405 Freeway and west of Harbor Boulevard.

Green Zone business leaders are now asking the city to lower the tax it receives on the gross receipts from those operations from 6% to 2%.

They are also proposing to allow home delivery taxed at 5%.

In a letter sent to the city, the group says business has been lost to distributors in other communities with more favorable tax rates.

The general lack of legal retail locations – in Orange County only Santa Ana allows the retail sale of pot – has created a “bottle neck of product,” and operators “have seen wholesale margins drastically reduce as prices of raw material and final form goods have fallen dramatically over the last few months because of the shaky market conditions and the flourishing black market,” the five-page letter says.

The city hasn’t been getting the tax revenue from marijuana sales it was expecting.

Allowing home delivery would help overcome the issue of limited legal retail locations and other issues for businesses, help customers and, because the state now allows delivery across California, it would let Costa Mesa benefit beyond its borders, the letter says.

Representatives of the local cannabis industry have been lobbying at council meetings and at City Hall for help for about a year. The letter is signed by 21 business owners and executives.

“It is an area that definitely needs study,” Stephens said, adding there is precedence for the council making tweaks to what voters approved in Measure X. “We have to kind of explore these issues and work with the community.

“It is very important to me that we increase our momentum in this area, that we don’t lose our momentum,” he said, calling this a “critical time for the industry.”


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