The Lemon Grove City Council unanimously agreed last week to ask voters to allow the city to tax a percentage of the gross sales receipts from retail medical marijuana dispensaries.
The City Council would have the authority to increase or decrease the tax rate up to 8 percent.
Lemon Grove estimates that it could receive between $280,000 and $420,000 annually from two cannabis stores. The measure will also include industrial hemp and hemp products. The measure will need a simple majority of 50 percent, plus one, to pass.
Lemon Grove currently has one legal dispensary serving customers, The Boulevard Dispensary on Federal Boulevard, but at least three others should be opening soon.
City Manager Lydia Romero said an independent California cannabis tax expert provided an analysis of its business tax and said that with four operational dispensaries, the city could bring in $560,000 at 4 percent and $1.12 million at 8 percent.
If voters pass the measure, the city would start collecting money from any dispensary in the city effective January 1, 2021.
Although the city currently only has legalized the retail sales of medical marijuana, the Nov. 3 ballot measure also will include the option to tax at lower rates commercial cultivation (up to 4 percent), laboratory testing (up to 2 percent), distribution (up to 3 percent) and manufacturing (up to 4 percent), should those become legalized at a later date.
At the meeting, the council also said it will fast-track allowing the sale of recreational cannabis in Lemon Grove, which it can do by approving it through a land-use ordinance.
“We have had several meetings (about) recreational versus medicinal and we’re headed in that (recreational use) direction,” said City Councilman David Arambula. “I get it. Some like it, some don’t, but the majority of folks in Lemon Grove want it.”
City Councilman Jerry Jones said he had a phone conversation on Tuesday with Dallin Young, chair of the Advocacy and Legislative Committee and board member of The Cannabis Chamber of Commerce, which represents more than 40 members throughout California. Young told Jones that while the group does not oppose cannabis-specific tax measures, it looks more favorably on them if they are “reasonable and allow licensed businesses to compete with the illicit market.”
In an email to the City Council, Young cited state excise taxes of 15 percent and combined sales taxes of 7.75 percent that he said alone account for an increase of 22.75 percent on cannabis products found in the licensed market versus those selling cannabis illegally.
“They are so heavily taxed,” Jones said. “You want to give them the tools to be successful and we don’t want to drive customers into the black market. They would feel much better about our ballot measure and participate if we looked like we are moving in a direction to legalize recreational. We need to start on legalizing recreational (cannabis) as soon as possible.”
The city looked at similar sales tax ordinances in Chula Vista, which has a 7 percent tax on retail marijuana sales and a $15-per-square-foot tax on cannabis-growing facilities, and in La Mesa, its next-door neighbor with three cannabis stores operating legally and that allows for recreational sales in addition to medical.
La Mesa has a 2.5 percent tax on retail marijuana sales not to exceed 6 percent of gross receipts. La Mesa established two tax rates for marijuana sold by a retailer: zero percent for medicinal retail sales to a customer with a valid California Department of Public Health’s Medical Marijuana Identification Card and a 4 percent tax rate for all other medicinal retail sales.