CALIFORNIA CITY – The recent changes in the city’s cannabis tax rates have enabled the city to be a potential hub for the industry.
During its regular session on Tuesday, the city council voted unanimously to reduce cannabis production and distribution rates from 6% to 1% for manufacturing and 0.5% for distribution.
Lowering tax rates makes the city a competitive option against other cities that have already set low or no tax rates.
“Cannabis tax rates absolutely have an impact on the business and the industry it attracts to the city,” said Jason Meister, a local cannabis investor. “With affordable California City tax rates, California City has the potential to become the largest cannabis city in all of (the state). I really think so. “
City administrator Anna Linn said the city only embraced the growing industry for one reason: sales.
“The benefits of this potential revenue will ultimately benefit residents by providing the city with a source of income to improve parks, street design across the city and more job opportunities for local residents,” she said. “It will also help remove the special tax and take over public safety for the general fund.”
Meister appeared before the council and explained the city’s ability to use the industry’s wholesale market.
“California City has something unique to offer the industry,” he said. “We have land, water, a good climate, sunshine, a set ordinance, a town hall that you can go to in normal times, ask questions and continue with your development.”
In Meister’s presentation, he was able to demonstrate the geographic advantage for the city, why it should take this opportunity to be part of the wholesale market.
“We’re on the northern end of the Southern California region for cannabis,” he said. “We’re just outside of LA. We’re also a long way from San Diego, another major retail market. Geographically, I think California City currently has the opportunity to capture a large portion of the business here. “
Despite all of these things, Meister asked why the city only has 2.1% of the licensed manufacturing market and 1.1% of the sales market in the state.
“I would argue that more companies have left California City than they have come to California City, and I believe this is due to the high tax rates that are specific to sales and manufacturing.”
Ray Iskander, owner of Bud Technology and the state’s first licensed distributor, said the 6% tax was the biggest obstacle to the economic prosperity of distributors and manufacturers in the city.
“I have a production building, it’s beautiful,” he said. “We don’t have a single employee. We paid all of our taxes to the city and state to maintain that license for the day of this meeting you have today. We struggle literally every day to make ends meet. Our insurance costs are four times higher than anything else in regular business.
Local cannabis business owner Anthony Espindola said customers have become wise and are now buying taxes.
“If I make something I pay 6% and then I go through a local dealer. I pay another 6%, that’s 12%,” he said. “$ 60,000 for a million is now $ 120,000 for a million for a product I developed myself here in Cal City. Then when we pass it on to the consumer; The consumer is simply not going to buy anything from Cal City because it will be too expensive. “
James Bryant, a representative for cannabis company Traditional, said they want to bring business to Cal City but are willing to sell through another city that has a cheaper tax option.
“What we want to do is we want to use all of the new cultivators that are going online,” he said. “We want to make sure there is an opportunity instead of having to run your business outside of California City. You are here.”
The originally proposed staff for manufacturing and distribution rates was to be reduced to 1%, but local cannabis industry officials suggested reducing the city’s distribution to 0.5%, and Councilor Jim Creighton agreed.
“If we are to be more competitive and to pull business here, we have to undercut,” he said. “Someone will come along and undercut us when we hit half a percent, but at least we’ll still be more competitive than those who stay at 1%.”
Although the Council voted on and approved the reduced tax rate, a new regulation will be drawn up and presented at the next Council meeting in April, which is to be officially adopted. The Council also requested that the new regulation be applied retrospectively to April 1st, as this is the start of a new fiscal quarter.