Council discusses uniform 2.5% cannabis rate, ongoing collection shortfalls and audit finding

City Council members and staff discussed adopting a uniform 2.5% cannabis tax rate that would eliminate a separate annual permit fee and incorporate that charge into the overall rate, and reviewed preliminary revenue receipts and compliance issues.

Supporters said the change would simplify collections and reduce staff time spent tracking annual permits. “We got responses from 3 of the 5 businesses saying that they would like to move to a uniform rate of 2 and a half percent and remove any annual permit,” a staff member said. Another speaker said the change would offset recent state tax increases for local retailers and make collections more straightforward.

Why it matters: folding the separate permit into a single rate would change how businesses remit local charges and could alter monthly cash flow and administrative work for the city.

In discussion of receipts, staff noted the town had received about $109,000 so far but cautioned that many businesses are quarterly filers and that totals will likely increase as July payments arrive. “Quarterly payers…they don't have to pay their tax bill until July 31, so we don't have the majority,” a staff member said. Councilmembers and business representatives also raised questions about deliveries and tax-crediting when sales are shipped to addresses outside the city, asking how those out-of-district sales will be reflected in city receipts.

Council and staff also reviewed an audit finding tied to one business from 2020. The business paid $10,000 toward an audit-determined underpayment of roughly $73,000 and then stopped payments. Staff said it had sent a final notice giving the business until Aug. 15 to provide a payment plan before legal action. “If I don't hear from them and get a payment plan by August 15, that legal action will be our next,” a finance staff member said. The council discussed updating the municipal code to add penalties or clearer enforcement steps specific to audit findings.

Discussion vs. action: the conversation recorded was a staff presentation and council discussion; no formal ordinance or tax vote was recorded in the meeting transcript. Staff indicated the draft resolution incorporating the permit removal and rate change had been revised and would be circulated for review prior to formal consideration. "We fixed that — both the removal of that and inspection," a staff member said when noting clarifications made in the resolution.

Next steps: staff said the revised resolution will be circulated and will appear to the next steps in the process (presentation to city manager/administration and then council agenda placement). Council members asked for continued monthly updates on receipts and requested clarity on how deliveries and out-of-district sales will be reported to the city.

Ending: councilmembers and business representatives said they support the administrative simplification; staff will carry the draft forward to the next stage for formal consideration and provide continued revenue tracking to the council.