Board OKs first‑reading 10‑year suspension of San Francisco cannabis business tax after heated debate

The San Francisco Board of Supervisors voted on first reading Dec. 9 to suspend the city's cannabis business tax for 10 years, a move supporters said is intended to give licensed cannabis retailers time to compete with an entrenched illegal market.

Supervisor Melgar, the ordinance's sponsor, told colleagues the market remains "highly competitive" and that illicit sellers control ‘‘more than 50% of the market," undercutting legal operators with lower prices and no regulatory or tax obligations. He said the deferral is not an elimination but a 10‑year pause to give the legal industry room to recover and better compete. "Rent control remains one of the most important tools for long‑term stability and affordability," Melgar said while arguing the pause helps preserve legal businesses and jobs.

Budget chair Supervisor Chan said she would oppose a decade‑long waiver, urging the board to consider the city's fiscal picture. "We continue to face close to a $1,000,000,000 budget deficit," Chan said, calling a 10‑year suspension that could forgo an estimated $80,000,000 in revenue "simply irresponsible" without fuller financial analysis during the budget process. Controller Greg Wagner told the board his office's projections put average annual tax revenue from the measure at about $6,200,000 once it is implemented.

Supervisor Mahmood supported the suspension, describing the strain on licensed cannabis retailers and arguing the waiver could reduce street‑level illegal markets: "Suspending this tax will give the industry more breathing room to make up ground against illegal, untaxed black markets that are still thriving on our streets," he said, citing specific neighborhood impacts.

Supervisor Walton, who opposed the measure, said the city faces unprecedented budget pressures and that suspending revenue streams at this time would be imprudent. "There's no way we can responsibly suspend this tax," Walton said, noting the larger budget context and warning that the suspension itself will not eliminate the black market.

The clerk recorded an 8‑to‑2 vote on the ordinance's first reading, with Supervisors Walton and Chan voting no. The ordinance passed on first reading; subsequent steps (including a required final passage vote and any related budget adjustments) were not completed at the Dec. 9 meeting.

What happens next: Because this action was on first reading, the suspension must return for final passage under the board's rules. Any final adoption would need to be reconciled with the city's budget process and is likely to generate further review and analysis from the mayor's office and the controller.