San Diego City Council Increases Local Cannabis Tax

The San Diego City Council voted Monday to increase the cannabis tax paid by licensed cannabis businesses in the city from 8% to 10%, The San Diego Union-Tribune reports. The city earned about $17 million from the tax last year and by hiking the tax rate on cannabis companies by 2%, city officials expect to receive an extra $4 million in annual taxes.

Proponents of the tax hike said the money could support city services like roads and parks. Council President Joe LaCava argued that a 2% bump would “not be felt by the average consumer,” at least not to the point of driving an otherwise legal shopper to an illegal source.

Meanwhile, opponents of the tax hike argued the industry is already over-taxed and struggling, and that increasing prices would harm local licensees by pushing consumers elsewhere for cheaper product — likely to the illicit market or to jurisdictions with lower tax rates.

“I have some hesitation about the fact that so many of our neighboring cities have significantly lower levels. I think the consumer is particularly sensitive to this adjustment.” — Councilmember Raul Campillo, via the Union-Tribune

The tax bump also ties San Diego as having the highest local tax rate in California, alongside Los Angeles and San Jose, which each collect 10% in local business taxes from the cannabis industry. With San Diego’s now 10% local cannabis tax and the city’s 7.75% sales tax — combined with the statewide cannabis tax, which will raise to 19% on July 1 — the tax rate on legal cannabis purchases in the city will exceed 35%, the report said.