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South Lake Tahoe Council OKs 1‑Year Cut to Cannabis Tax, Ends Mitigation Fee
Summary
The South Lake Tahoe City Council voted to move forward with a one‑year reduction in the local cannabis business tax from 6% to 3% and to eliminate the public safety mitigation fee, directing staff to return with implementation details and an economic review before the change expires.
The South Lake Tahoe City Council voted on Nov. 4 to pursue a one‑year reduction in the city’s local cannabis business and professions tax from 6% to 3% and to phase out the public safety mitigation fee, measures the council said will be reviewed again before any permanent change.
Council members said they were responding to pleas from local cannabis operators who said high tax rates were driving customers to the unregulated market and to neighboring Nevada. “Reducing it from 6% to 3% is a meaningful improvement,” said Jess, CEO of Canaloo, speaking at the meeting. She urged the city to consider a 1% rate to stabilize the legal market and to protect medical patients who rely on affordable access.
The move drew immediate pushback from nonprofit leaders and other residents who warned the cuts would shrink funding for community grants and programs currently supported by cannabis revenue. Jude Wood, CEO of the Boys & Girls Club of Lake Tahoe, said grants funded by cannabis tax dollars provide vital youth services and food programs; Cheyenne Lane of Tahoe Youth and Family Services said the drop in revenue would threaten emergency shelter and drop‑in services for local youth.
City finance staff presented the council with estimates that reducing the tax rate to 3% would cut roughly $450,000 a year in revenue and that eliminating the public safety mitigation fee would reduce revenues by about $82,000. Staff said those losses would affect community grants, infrastructure projects and a partially funded police officer position and recommended the council set the cut as a time‑limited change with a scheduled review.
Council members voted to direct staff to implement the reduction on Dec. 1 and to return to the council prior to the one‑year expiration with a full review of fiscal impacts and options to preserve key community programs. The council also asked staff to propose options for replacing the cannabis grant program funding if needed.
The vote followed hours of public comment. Cannabis operators argued that high local and state taxes — which together can exceed 30% of a product’s sale price in the Tahoe area — make the legal market uncompetitive, drive customers to illegal sellers, and reduce the regulated product supply. Nonprofit leaders and social‑service providers urged the council to prioritize funding for emergency housing, behavioral health services, and youth programs funded in part by the existing cannabis grants.
The council’s pending action will take effect Dec. 1, with the reduction set to expire in December 2026 unless extended. Staff said they will prepare the administrative rules necessary to carry out a medical exemption, configure point‑of‑sale reporting and return with a detailed implementation and fiscal mitigation plan.
