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California Midterm Ballots To Bring Green Wave of Cannabis Tax Regulations

By Jasmine Davaloo
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As state and local jurisdictions rake in millions of dollars in tax revenue from the state’s legal cannabis industry, new states, counties and cities are piling onto the cannabis tax bandwagon. There are currently hundreds of local cannabis business taxes in place in California. On the November ballots, there are 47 new local cannabis tax measures. In fact, even some local jurisdictions that outlaw cannabis operations want a piece of the green pie and are asking voters to impose cannabis business taxes.

More cannabis tax measures being passed means more regulations and compliance responsibilities for cannabis businesses. This is especially taxing (pun intended) for multi-licensed and multi-location cannabis businesses. With hefty monetary penalties and even revocation of business licenses as consequences of noncompliance, adherence to state and local tax regulations is of paramount concern to cannabis businesses. Below is a list that Taxnexus has put together showing all of the cannabis tax measures on the November 6 ballots in California:

Taxnexus is an automated transaction-to-treasury cannabis tax compliance solution for the entire cannabis supply chain that provides point-of-sale state and local cannabis sales and use tax calculation, tax data management as the authority of record, and timely filing of returns with all applicable taxing authorities.

California City and County Cannabis Tax Measures November 6, 2018 Ballots

City County Measure Name Proposal
Adelanto San Bernardino S Adelanto Marijuana Tax To authorize the city to impose a tax on marijuana businesses of up to $5.00 per square foot on nurseries and up to 5% on other businesses.
Atascadero San Luis Obispo E-18 Atascadero Cannabis Business Tax To impose a tax on cannabis businesses at annual rates not to exceed $10.00 per canopy square foot for cultivation, 10% of gross receipts for retail cannabis businesses, 2.5% for testing laboratories, 3% for distribution businesses, and 6% of gross receipts for all other cannabis businesses.
Atwater Merced A Atwater Marijuana Tax To authorize the city to impose a 15% tax on marijuana businesses.
Benicia Solano E Benicia Marijuana Business Tax To authorize the city to impose a tax of up to $10 per square foot for marijuana nurseries and 6% of gross receipts for other marijuana businesses.
Capitola Santa Cruz I Capitola Marijuana Business Tax To authorize the city to tax marijuana businesses at a rate of up to 7% with no expiration date to fund general city purposes.
Chula Vista San Diego Q Chula Vista Marijuana Business Tax To authorize the city to tax marijuana businesses at the following rates: 5% to 15% of gross receipts or $5 to $25 per square foot for cultivation.
Colfax Placer C City of Colfax Cannabis Business Tax To tax cannabis businesses at annual rates not to exceed $10.00 per canopy square foot for cultivation (adjustable for inflation), 6% of gross receipts for retail cannabis businesses, and 4% for all other cannabis businesses.
Colton San Bernardino U Colton Marijuana Tax To authorize the city to impose a tax on marijuana businesses of up to $25.00 per square foot on nurseries and up to 10% on other businesses.
Emeryville Alameda S Emeryville Marijuana Business Tax To enact a marijuana business tax at a rate of up to 6% of gross receipts to fund general city purposes.
Fresno Fresno A Fresno Marijuana Business Tax To tax marijuana businesses at rates of up to $12 per canopy square foot and up to 10% of gross receipts for medical dispensaries and other marijuana businesses, with revenue dedicated to the city’s general fund an a community benefit fund.
Goleta Santa Barbara Z2018 Goleta Marijuana Business Tax To authorize the city to tax marijuana businesses at the following initial rates with a cap at 10% of sales: 5% for retailers; 4% for cultivators; 2% for manufacturers; and 1% for distributors/nurseries.
Hanford Kings C Hanford Cannabis Business Tax To tax cannabis businesses at an annual maximum rate of $7 per square foot of canopy for cultivation businesses using artificial lighting only, $4 per square foot of canopy for cultivation businesses using a combination of artificial and natural lighting, $2 per square foot of canopy for cultivation businesses using natural lighting only, and $1 per square foot of canopy for nurseries, 1% of gross receipts of laboratories, 4% of gross receipts of retail sales, 2% of gross receipts of distribution and 2.5% of gross receipts of all other types of cannabis businesses.
Hesperia San Bernardino T Hesperia Marijuana Tax To authorize the city to impose a tax on marijuana businesses of up to $15.00 per square foot on nurseries and up to 6% on other businesses.
La Mesa San Diego V La Mesa Marijuana Business Tax To authorize the city to tax marijuana businesses at rates of up to 6% gross receipts and up to $10 per square foot of cultivation.
Lassen Lassen M Lassen County Commercial Marijuana Business Tax To authorize the county to enact a tax on commercial marijuana at rates of between $0.50 to $3.00 per square foot for cultivation and 2.5% to 8% on gross receipts for other businesses, such as retail, distribution, manufacturing, processing, and testing.
Lompoc Santa Barbara D2018 Lompoc Marijuana Business Tax To authorize the city tax marijuana businesses at the following rates: $0.06 per $1 of non-medical retail sales proceeds; $0.01 per $1 of cultivation proceeds; $15,000 for net income less than $2 million of manufacturing/distribution proceeds; $30,000 for net income $2 Million or more of manufacturing/distribution proceeds; a total aggregate tax of $0.06 per $1.00 of microbusinesses proceeds; and no tax on testing.
Malibu Los Angeles G Malibu Marijuana Business Authorization and Tax To authorize the sale of recreational marijuana in the city and imposing a general tax at the rate of 2.5% of gross receipts on the sale of recreational marijuana.
Marina Monterey V Marina Marijuana Business Tax To authorize marijuana businesses to operate in the city and authorizing the city to tax marijuana businesses at rates of up to 5% of gross receipts, with revenue funding general city purposes.
Maywood Los Angeles CT Maywood Marijuana Business Tax To authorize the city to tax marijuana businesses at a maximum rate of 10% of gross receipts to fund general city purposes.
Moreno Valley Riverside M City of Moreno Valley Commercial Cannabis Activity Tax To enact a tax on cannabis sales and cultivation, not exceeding 8% of gross receipts and $15 per square foot of cultivation.
Morgan Hill Santa Clara I Morgan Hill Marijuana Business Tax To authorize the city to tax marijuana businesses at annual rates up to $15.00 per canopy square foot for cultivation and up to 10% of gross receipts for all other marijuana businesses.
Mountain View Santa Clara Q Mountain View Marijuana Business Tax To enact a tax on marijuana businesses of up to 9% of gross receipts to fund general city purposes.
Oakland Alameda V Oakland Marijuana Business Tax Amendments To amend the marijuana business tax law to: allow marijuana business to deduct the cost of raw materials from their gross receipts and to pay taxes on a quarterly basis; and allow the city council to amend the law in any manner that does not increase the tax rate.
Oroville Butte T Oroville Marijuana Tax To authorize an annual gross receipts tax on cannabis businesses at rate not to exceed 1%, with initial rates of 5% on retailers and manufacturers; 4% on cultivators; 3% on distributors; 2% on nurseries; 0% on testing laboratories; and 7% on microbusiness to generate approximately $300,000 to $600,000 in annual revenue.
Paso Robles San Luis Obispo I-18 Paso Robles Cannabis Business Tax To impose a maximum tax rate on every person or entity operating or conducting a cannabis business within the City a cultivation tax of up to$20.00 per square foot of space utilized in connection with the cultivation and processing of cannabis; a gross receipts tax of up to 10% for all cannabis transportation; a gross receipts tax of up to 15% for all cannabis manufacturing, testing, and distribution; and a gross receipts tax of up to 10% for dispensaries.
Pomona Los Angeles PC Pomona Marijuana Business Tax To authorize the city to tax marijuana businesses at rates of $10.00 per canopy square foot for cultivation and up to 6% of gross receipts for all other marijuana businesses to fund general city purposes.
Riverbank Stanislaus B City of Riverbank Cannabis Business License Tax To authorize the City Council of the City to impose a business license tax at a rate of up to 10% of gross receipts on cannabis businesses and dispensaries, to help fund general municipal services.
San Bernardino San Bernardino W San Bernardino Marijuana Tax To authorize the city to impose a tax on marijuana businesses of up to $10.00 per square foot on nurseries and up to 6% on other businesses.
San Diego San Diego AA City Council Marijuana Business Tax Measure To authorize the city to tax marijuana businesses at the following rates: $14 per square foot; up to 8% on manufacturing and distribution; up to 10% on medicinal retail; up to 12% on adult-use retail; and up to 3.5% on testing.
San Francisco San Francisco D San Francisco Marijuana Business Tax Increase To tax marijuana businesses with gross receipts over $500,000 at a rate between 1% and 5%, exempting retail sales of medical marijuana, and expanding the marijuana business tax to businesses not physically located in San Francisco.
Santa Ana Orange Y Santa Ana Recreational Marijuana Business Tax To authorize the city to tax marijuana businesses at rates of $0.25 to $35.00 for gross square footage and up to 10 percent for cultivating, manufacturing, distributing, selling, or testing.
Santa Clara Santa Clara M Santa Clara Marijuana Business Tax To authorize the city to tax commercial marijuana businesses up to 10% of gross receipts and up to $25 per square foot for cultivation.
Simi Valley Ventura Q Cannabis Business Tax To enact a maximum tax on gross receipts of cannabis businesses in the City after January 1, 2019, as follows: for testing, 2.5%; for retail sales, retail delivery, or microbusiness retail, 6%; for distribution not to consumers, 3%; for manufacturing, processing or nonretail microbusiness, and any other type of business not otherwise specified, 4%; and for cultivation, a tax per square foot of canopy ranging from $2.00 per square foot of canopy to $10.00 per square foot of canopy, depending on the type of lighting (artificial or natural) used.
Solvang Santa Barbara F2018 Solvang Marijuana Business Tax To authorize the city to tax marijuana businesses at an initial rate of 5 percent of gross receipts with a cap of 10 percent and a maximum annual increase of 1 percent.
Sonora Tuolumne N City of Sonora Cannabis Business License Tax To enact a business license tax at a rate of up to 15% of gross receipts on cannabis businesses, to help fund general municipal services; and increasing the City’s appropriations limit for the Fiscal Years 2019-2023 by the amount of tax proceeds received.
Suisun Solano C Suisun Marijuana Business Tax To authorize the city to impose a tax of up to $25 per square foot and 15% gross receipts for marijuana businesses.
Union City Alameda DD Union City Marijuana Business Tax To authorize the city to tax marijuana businesses at rates of $12.00 per square foot for cultivation and 6 percent of gross receipts for other businesses to fund general municipal services.
Vista San Diego Z Vista Retail Medical Marijuana Sales and Tax Initiative (November 2018) To authorize commercial retails sales of medicinal marijuana for up to 11 retailers and enacting a 7% tax on the business’ gross receipts.
Contra Costa R Contra Costa County Marijuana Business Tax To authorize Contra Costa County to tax commercial marijuana businesses in the unincorporated area in the amount of up to $7.00 per canopy square foot for cultivation and up to 4 percent gross receipts for all other cannabis businesses to fund general County expenses.
El Dorado N, P, Q, R, S Commercial Cannabis Tax Measures To impose a general tax on any independently authorized commercial cannabis activity in the unincorporated areas of El Dorado County at rates up to: $30 per square foot or 15% for cultivation; 10% for distribution, manufacturing, and retail; and 5% for testing laboratories, effective until amended or repealed, with estimated annual revenue of $1,900,000 to $52,800,000.

To authorize outdoor and mixed-light (greenhouse) commercial cannabis cultivation for medicinal use on parcels of at least 10 acres zoned Rural Lands, Planned Agricultural, Limited Agricultural, and Agricultural Grazing that are restricted in canopy size, required to pay a County commercial cannabis tax, and subject to a site-specific review and discretionary permitting process with notification to surrounding property owners and environmental regulation.

To authorize outdoor and mixed-light (greenhouse) commercial cannabis cultivation for recreational adult use on parcels of at least 10 acres zoned Rural Lands, Planned Agricultural, Limited Agricultural, and Agricultural Grazing that are restricted in canopy size, required to pay a County commercial cannabis tax, and subject to a site-specific review and discretionary permitting process with notification to surrounding property owners and environmental regulation.

To authorize the retail sale, delivery, distribution, and indoor cultivation of commercial cannabis for medicinal use on parcels zoned Community Commercial, Regional Commercial, General Commercial, Industrial High, and Industrial Low that are restricted in number and concentration, required to pay a County commercial cannabis tax, and subject to a site-specific review and discretionary permitting process with notification to surrounding property owners and environmental regulation.

To authorize the retail sale, delivery, distribution, and indoor cultivation of commercial cannabis for recreational adult use on parcels zoned Community Commercial, Regional Commercial, General Commercial, Industrial High, and Industrial Low that are restricted in number and concentration, required to pay a County commercial cannabis tax, and subject to a site-specific review and discretionary permitting process with notification to surrounding property owners and environmental regulation.

Lake K Lake County Marijuana Business Tax To authorize the county to enact a marijuana business tax at the rates of $1.00 per square foot for nurseries and cultivators and between 2.5% and 4% for other businesses.
San Joaquin B Unincorporated County of San Joaquin Cannabis Business Tax To impose a special tax on commercial cannabis businesses in unincorporated San Joaquin County at a rate of 3.5% to 8% of gross receipts, with an additional cultivation tax of $2.00 per square foot of cultivation space.
Tuolumne M Tuolumne County Commercial Cannabis Business Tax The County to impose a 0%-15% gross receipts tax on commercial cannabis businesses (but no less than $0-$15 per square foot for cultivation businesses as annually increased by a consumer price index) in the unincorporated area of Tuolumne County, and to authorize the Board of Supervisors to implement and adjust the tax at its discretion, with funds staying local for unrestricted general revenue purposes, including but not limited to public safety, health,environmental protection and addressing industry impacts, unless repealed or amended by voters.

Cannabis-Infused Wine Comes to California in 2018

By Aaron G. Biros
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Rebel Coast Winery announced this week the launch of the world’s first cannabis-infused, alcohol-removed wine. The company’s THC-infused Sauvignon Blanc, available only in California, will hit dispensary shelves in 2018.

Co-founders Alex Howe and Chip Forsythe

According to the press release, they plan to be fully compliant with California’s new regulations for the cannabis industry, hence the lack of alcohol in the product, which is a requirement under the state’s new manufacturing rules. “Rebel Coast’s grapes are grown in Sonoma County – California’s wine capital – and fermented through a traditional winemaking process,” reads the press release. “Rebel Coast removes the wine’s alcohol and infuses each bottle of its premium Sauvignon Blanc with 16 milligrams of organic tetrahydrocannabinol (THC)…” In addition to the THC infusion, they also add terpenes to the final product, giving it the cannabis fragrance.

According to Alex Howe, co-founder of Rebel Coast, the winery is in Sonoma, but they’re waiting to see where they’ll be licensed to extract, infuse and package the final product. “The winery is in Sonoma, we make the wine, and remove the alcohol there,” says Howe. “We’re currently waiting for licensing transfer approval in two locations, one in San Bernardino, the other West Sacramento, and exploring an option to infuse in San Benito County with a currently licensed location.” They plan to co-package under a third party license and seek a Type N license for extraction with non-volatile solvents.

Rebel Coast has partnered with a fully licensed outdoor grower, and is looking for an extractor that will be able to handle their volume needs. With regard to their infusion and extraction process, Howe says they combine clear distillate with a surfactant to make the THC liquid soluble and fast acting.

He expects the full infusion and packaging operations to be up and running by early 2018. “The San Bernardino and West Sacramento locations were previously licensed for infusion, packaging, and manufacturing, but with purchase of the building, the change in ownership has caused us to wait for the license to change ownerships too.”

“We’ve continued our disruptive approach to craft the world’s first cannabis-infused, alcohol-free wine,” says Chip Forsythe, co-founder and chief executive officer of Rebel Coast. “We wanted to excite the rebellious spirit in Americans through innovation, so we took two world-class California products – marijuana and wine – and created a proprietary process that resulted in a delicious, crisp and elegantly crafted Sauvignon Blanc that’s teed up to be a game changer for the wine and cannabis industries.”

They plan to start shipping product in early 2018, as well as distribute to over 500 dispensaries throughout the state, via Green Reef Distributing, a licensed cannabis distributor that represents wine and spirit accounts for other CBD products. Later in 2018, Rebel Coast plans on rolling out cannabis-infused Rosé and champagne, as well as CBD-infused wines. In the press release the company teases their products will be available in other legal states in the coming months.

Wildfires Devastating Californian Cannabis Farms

By Aaron G. Biros
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Earlier this week, a series of wildfires began ripping through Napa, Sonoma and Mendocino Counties, causing mandatory evacuations, rampant property damage and taking the lives of at least 17 people. Extraordinarily high wind gusts up to 50 mph have swept through communities in Northern California, leaving complete destruction in its wake.

According to The Washington Post, flames have reached more than 170,000 acres since Sunday when the fires began. The cause is still unknown. The President declared a state of emergency, allowing emergency funds to go to clearing debris and supplies for shelters. Nearly 25,000 have fled their homes to shelters in seven counties.

NASA’s Aqua satellite took this picture of the smoke over California on Tuesday
Photo: NASA, Flickr

The area is well known for its wine production, an industry that is taking a very hard hit from the wildfires. It is also known as a productive cannabis growing area as part of the Emerald Triangle, synonymous with high quality, outdoor cannabis farms. A number of cannabis farms have been severely impacted by the flames.

We’ve received numerous reports of growers fleeing their homes and farms to get to safety. The LA Times reported that at least seven cannabis farms have been engulfed in flames. According to Amanda Reiman, vice president of community relations at Flow Kana, a distribution company working with cannabis farmers in the Emerald Triangle, they are in active evacuations and the fire is only about 5% contained. “It will be a while before we know the extent of the damage to our farmers and our community,” says Reiman. “The Emerald Triangle is a large region and central Mendocino county contributes a lot. Our farmers are resilient, but right now we are all focused on safety and vigilance.”

Kristin Nevedal, founder and chair of International Cannabis Farmers Association (ICFA), says she’s received information about cannabis farms being destroyed. “The true extent of damage to farms, lives and communities won’t unfortunately be known for sometime,” says Nevedal. “There is no rain in the immediate forecast, conditions are dry and we have had high winds.” Nevedal says the damage goes way beyond just a business setback. “Traditional sun grown cannabis farmers often live on the property they farm, so for many, a forest fire can mean not only loosing the crop but also their homes,” says Nevedal. “While there are fire insurance policies available for houses and outbuildings, the operational infrastructure components and the crop itself can be challenging or impossible to insure.” She says things like water storage tanks, water supply systems, irrigation systems, fences, water pumps and solar systems might not be insured at all. “Law enforcement in Mendocino is coordinating, to the best of their ability, with evacuees who have fire damage or have been evacuated, to insure public safety while assisting folks with repopulating their property and/or assessing the status of fire damage,” says Nevedal.

Because California is expected to implement their full adult use legalization in early 2018, the wildfires are particularly devastating to businesses that have been gearing up for the new market. To make matters worse, the fires came during peak harvest time, while growers are cutting plants and preparing their entire crops for distribution and sale.

Over 5,000 residents have evacuated in Sonoma County

Devika Maskey, founder of TSO Sonoma, a cannabis farm in Sonoma County, could only speak briefly because her farm is under evacuation orders. “We are getting all personnel off the hill to safety,” says Maskey. “The wind will be picking up to 40-50mph again later today.” Those high winds have the potential to spread the flames quicker, destroying more property and putting more lives at risk.

Maskey says the wildfires are having an enormous impact on their crops this year. “We do not have enough time to harvest the outdoor crop,” says Maskey. “So far there has been clear skies, but if the fire gets closer it can taint the buds with a smoky smell and flavor.”

Maskey says she has a number of friends in the cannabis space that have been severely affected already. “We do have a few friends that have lost their farms already,” says Maskey. “About a dozen other friends and family members who have lost their homes.” In Sonoma County alone, 5,000 people have been evacuated to shelters as of Wednesday morning, reports The Washington Post. “This has been a devastating week for many people and businesses,” says Maskey. “Our priority is getting everyone off the hill and to safety.” If you want to help the cannabis growers impacted by the fires, Maskey recommends donating to this growers relief fund or donate to the North Bay Fire Relief fund here. 

This list of charities, including GoFundMe pages, food banks and shelters in need of supplies and donations, is also a helpful resource to figure out how you can help those impacted by the fires.

Digipath Expands To California

By Aaron G. Biros
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In July, we sat down with the folks at Digipath, Inc. when they received their testing license in Nevada for the adult use market. In that conversation, they mentioned they were looking to expand into California.

According to a press release published September 25th, DigiPath, Inc. has entered a joint venture to establish their first cannabis-testing lab in California. They will be working with Don Ashley, an experienced real estate developer and cannabis entrepreneur, to launch Humboldt Botanical, LLC, conducting business under the name “Digipath Botanical Testing”.

Ashley says they expect to be fully operational by Q1 of 2018. “We expect to break ground on this project in the next few weeks and hope to be operational in early Q1 2018 just after the state-wide adult-use market is expected to launch, as we have already obtained approval from the local planning authorities for the entire complex,” says Ashley.

Todd Denkin, founder and president of Digipath

Todd Denkin, president of Digipath, is optimistic for California’s market and the coming regulations. “The state of California is estimated to be the single largest cannabis market in the U.S. Adult-use cannabis legislation was approved by California residents last November, and we expect these new regulations to be implemented in 2018,” says Denkin. “The good news for the industry is that the requirements for cannabis testing will be significant, and we are excited to partner with Don and his team to pursue this opportunity in Humboldt County.”

Ashley is contributing roughly $2 million to build and equip the lab with instrumentation, while Digipath Labs will manage and supervise operations at the lab. According to the press release, Digipath will provide a non-exclusive license to use its intellectual property for the operation of the lab. Digipath Labs will retain rights over all the scientific data generated in the lab.

Cindy Orser, PhD., chief science officer at Digipath

According to Cindy Orser, PhD., chief science officer at Digipath, that data will be put to good use. “Digipath Labs has developed an algorithm for use in strain authentication based largely on terpene profiling from our testing lab in Nevada and we are eager to further test our hypothesis with an expanded dataset from cannabis grown in Northern California,” says Orser.

While testing labs are primarily seen as safeguards for public health and safety, using data to correctly identify strains is a relatively new concept. “Digipath Labs is all about public health and safety through testing for adulterants,” says Orser. “Another component to quality is having confidence in product authenticity at the dispensary level. Not only is the consumer buying quality assured products but truth in advertising when it comes to strain nomenclature.”

Denkin says they were proactive in working toward getting the license early on. “Our partners have been dealing with the local regulators while we have been providing the proper SOP’s for the local government in order to receive the proper licensure in the area,” says Denkin. Taking their experience from Nevada to California, Orser says they have been asked to present to the California Toxicology Association on their experience with cannabis testing in the highly regulated marketplace of Nevada.

The laboratory in Humboldt is going to be part of a “cannabis industrial park,” alongside an R&D facility, oils/concentrate manufacturing center, health and wellness center, distribution and processing facility, tissue culture nursery, hemp clothing outlet, and coffee bistro, according to the press release.

Looking forward to growing their business, Denkin says they hope to launch a lab in Southern California. “We do expect to have a larger footprint in California because of the size of the market and are looking for locations in Southern California as well,” says Denkin. When asked about any new plans to expand elsewhere, Denkin says they’ll let us know. “We are continuing with our business plan and actively seeking the right mergers and acquisitions. Stay tuned.”