San Francisco Delays Cannabis Tax Implementation

Officials in San Francisco, California last week delayed the implementation of the city’s cannabis taxes until the end of 2021, Law360 reports. The Board of Supervisors also cut industry operators’ tax burdens by raising the threshold for when they will start collecting taxes from the first $500,000 of a business’ gross receipts to $1 million.

The measure sets gross receipt taxes from sales up to and including $1 million at 2.5 percent, with anything above that mark taxed at 5 percent. The bill also imposes a 1 percent tax on any other cannabis revenue up to $1 million, or 1.5 percent for anything above $1 million, the report says. California imposes a 15 percent tax rate on sales.

City officials said the new ordinance would reduce the city’s 2021 revenue by about $7 million.

Supervisor Rafael Mandelman said that the tax break was needed because operators had been slow to get the permits they needed to open and that more cannabusinesses would be open by the time the tax was supposed to take effect at the start of 2021. The measure was approved unanimously.

“Now is no time to be imposing a new tax on small businesses. By deferring the Cannabis Business Tax by one year, we can help stabilize these businesses and provide time for the state to adjust its tax structure and for the Biden Administration (we hope) to update federal policies.” – Mandelman in a statement to the San Francisco Examiner prior to the vote

John Delaplane, president of the San Francisco Cannabis Retailers Alliance and a partner in two dispensaries, estimated that a business would “have to do at least $7 million in revenue” in order to break even on the tax.

San Francisco voters first approved the tax in 2018.