SANTA ROSA, CA | April 19, 2024
The Sonoma County Board of Supervisors on Tuesday voted unanimously to adjust county tax rates for cannabis operations in unincorporated areas in response to changes in the cannabis market. The amended Cannabis Business Tax Ordinance, which is scheduled to go before the Board of Supervisors for a second reading on April 30, would, upon final approval, take effect July 1. Projected cannabis tax revenue is $1.4 million for fiscal year 2024-25, a slight decrease from the previous year estimate.
Following the action of the supervisors, most cannabis business tax rates will be reduced from previous rates, except for retail (dispensary) operations, which will increase from 2 percent to 3 percent. The tax rate for cannabis manufacturing operations will be lowered from 3 percent to 1.5 percent. Outdoor cultivation will be taxed at 69 cents per square foot, down from 75 cents per square foot; mixed-light cultivation will be taxed at $2.51 per square foot, down from $3 per square foot; and indoor cultivation will be taxed at $7.58 per square foot down from $12.50 per square foot.
“Adjusting these taxes is a conservative approach to a complex issue and will hopefully offer support to local small businesses while reimbursing the county for program expenses,” said Supervisor David Rabbitt, chair of the Board of Supervisors. “I look forward to having the opportunity for a broader review when this comes back to the Board at a later date.”
The new tax rates allow for closer alignment between tax rates in unincorporated areas around the state as well as with those within the cities.
According to a report commissioned by the County, between 2023 and 2024 the volume of outdoor cultivation in unincorporated areas of the county decreased by 31 percent. In addition, the average price per pound for indoor cannabis decreased from $1,230 to $606. The average price per pound for outdoor cannabis products decreased to a lesser extent from $308 to $277.
Based on fiscal year 2022-23 cannabis business tax revenue, the new retail (dispensary) tax rate will yield approximately $160,000 in increased revenue while the adjusted manufacturing tax rate will result in about a $30,000 revenue decrease, resulting in a net projected revenue increase of $130,000.
The County’s cannabis program includes staff in five departments, legal costs and other contract services, including the Environmental Impact Report and Cannabis Program Update. Cannabis program costs are funded by cannabis business tax revenue and cannabis business tax fund balance. The County’s overall cost of managing the cannabis program is projected to be $1.7 million for the 2024-25 fiscal year and climb to $1.8 million in 2026-27.
Costs for the Department of Health Services Environmental Health Division and Department of Agriculture / Weights & Measures are offset by permit fees. Code enforcement costs are supported by the cannabis tax fund.
The Cannabis Business Tax, or Measure A, was passed by voters on March 7, 2017 with 71 percent voter approval. Measure A provides a framework for taxation that sets maximum allowable rates for all operator types and grants authority to the Board of Supervisors to set lower rates, tax certain operator types and establish tax administration policies.
For more information about Sonoma County’s revised Cannabis Business Tax Ordinance, or other questions related to cannabis operations in Sonoma County, please email [email protected] or visit:
