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Officials propose drastic tax cuts for struggling cannabis businesses

November 13, 2024 | Humboldt County, California


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Officials propose drastic tax cuts for struggling cannabis businesses
In a recent government meeting, officials discussed the pressing need to reconsider local taxation measures affecting the cannabis industry, citing ongoing challenges faced by cultivators. One speaker emphasized the detrimental impact of federal laws and high taxes on the profitability of local businesses, urging the board to pause current tax measures to allow operators time to recover financially.

Supervisor Royal acknowledged that some business owners are seeking an \"off ramp\" to exit the industry, indicating a need for supportive measures rather than coercive actions regarding permit surrenders. He highlighted the varying tax structures in neighboring counties, noting that while some have lower rates, others impose complex taxation based on cultivation methods.

Supervisor Monroe proposed a significant reduction of the cannabis tax to 0% for the next two years, suggesting that outdoor cultivation should be taxed at a lower rate due to its inherent risks. He advocated for a shift from canopy-based taxation to a gross receipts model, arguing that canopy size does not guarantee product yield.

The board also explored the feasibility of implementing a flat tax system, which could simplify administration but may not significantly reduce the workload for staff responsible for tax assessments. Current estimates indicate that about 25% of a full-time employee's time is dedicated to revising tax bills, suggesting that administrative burdens remain a concern.

The discussions underscored the complexities of local cannabis taxation and the urgent need for a balanced approach that supports local businesses while ensuring fair revenue generation for the county. Further deliberations are expected in March regarding potential tax adjustments and support strategies for struggling cultivators.

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