Supervisors advance ordinance to delay cannabis business tax and raise exemptions through 2021

The Budget and Finance Committee voted Nov. 4 to advance an ordinance from Supervisor Rafael Mandelmann to the full Board that would suspend the newly enacted cannabis business tax for calendar year 2021 and adjust tax thresholds to provide relief for smaller and equity-focused cannabis businesses.

Mandelmann said the 2018 voter-approved measure (Prop D) had assumed more retailers would be operational by January 2021, but permitting delays and a slow rollout have left fewer businesses open. The proposed ordinance would suspend imposition of the local cannabis business tax through Dec. 31, 2021; raise the gross-receipts exemption from the first $500,000 to the first $1 million; and change the upper thresholds for tax brackets for retail and non-retail activities from $1,000,000 to $1,500,000.

Nick Menard of the Budget Legislative Analyst’s office said the city’s estimated revenue loss for the current year and the next fiscal year is about $7.1 million and flagged it as a policy matter because it reduces revenues. Public commenters including cannabis operators, equity applicants and patient advocates urged the delay, saying high local taxes would push consumers to the illicit market and harm equity operators and medical patients on fixed incomes. "Delaying this tax increase... will help tremendously," said caller David Goldman, representing local medical-cannabis advocates.

Supervisor Mandelmann moved the ordinance to the full Board with a positive recommendation; the committee approved the motion by roll call vote. The item will be scheduled for Board readings so the tax can be implemented or deferred per the ordinance timing if adopted by the Board.