San Francisco supervisors approve multi‑year suspension of cannabis business tax on first reading after split vote

A divided San Francisco Board of Supervisors voted 9-2 on Nov. 15 to pass on first reading an ordinance that suspends the city's cannabis business tax through the 2025 fiscal year.

The vote followed an hour of debate over whether the city should extend the suspension for three years, as the ordinance proposed, or return to the year-by-year approach supervisors have followed since the tax was placed on pause.

Why it matters: Supporters said a multi‑year suspension gives legal cannabis businesses needed certainty as they compete with a still‑large illegal market; opponents said multi‑year relief would forgo substantial city revenue in a volatile budget period and that a shorter, annual extension would allow policymakers to reassess.

Supervisor Aaron Peskin moved an amendment to limit the suspension to one year, striking the proposed 2024-25 years from the ordinance; Supervisor Mark Chan seconded. Peskin argued the board had repeatedly extended the suspension year‑by‑year and that a three‑year break was “not the fiscally prudent or appropriate thing to do.” The amendment failed 4-7.

Supervisor Chan, who joined Peskin in supporting the amendment, told colleagues the city controller's office projected the industry's business tax at "about $10,000,000 or so" per year and that a three‑year suspension would total roughly "$30,000,000" in foregone revenue. Chan said the controller had suggested an alternative: raise the small‑business gross‑receipts exemption from $1 million to $2.5 million, which he said would reduce annual revenue loss to roughly $2 million if implemented, but that such a change would require additional administrative work and time.

Supporters of the three‑year suspension cited the high cumulative tax burden on legal cannabis businesses. Supervisor Hillary Ronan said the Office of Cannabis estimates the legal market remains smaller than the illegal market by an estimated two‑to‑one, and that enforcement and time were needed to help legal operators compete.

Supervisor Aaron Peskin (author of the amendment) moved to amend the ordinance as noted; Chan seconded. Amendment vote: Aye — Walton, Chan, Mar, Peskin; No — Safa Yi, Stephanie, Dorsey, Mandelmann, Melgar, Preston, Ronan. Motion to amend failed 4-7.

Final vote on ordinance (first reading): Aye — Walton, Stephanie, Dorsey, Mandelmann, Mar, Melgar, Preston, Ronan, and one other recorded as aye (total 9). No — Chan, Peskin (2). The ordinance passed first reading 9-2.

What supporters said: Supervisor Shamann Walton and others said temporary relief helps legal operators survive a market still taxed heavily at the state level and better compete against illegal sellers. Supervisor Dorsey asked to be a co‑sponsor of the underlying ordinance and supported the three‑year suspension, saying certainty over three years would be an asset for businesses.

What opponents said: Supervisor Peskin and Supervisor Chan urged greater fiscal caution and recommended continuing the year‑to‑year approach that allowed the board to revisit the suspension annually. Peskin said a three‑year suspension would diminish opportunities to re‑examine the policy sooner.

Where it goes next: The ordinance passed first reading and will return to the board for second reading and final passage in a future meeting.

Ending: The ordinance clears the immediate procedural hurdle but the debate exposed a split on whether the city should prioritize short‑term fiscal flexibility or multi‑year relief for a single industry that some supervisors described as still overtaxed by state and local levies.