City Council
MEETING DATE: 5/11/2016
TITLE:
Title
Medical Cannabis Taxation
End
FROM:
Charlie McClendon, City Manager
RECOMMENDATION:
Recommendation
Consider medical cannabis taxation options and provide direction to staff.
Body
BACKGROUND:
Chapter 3.48 of the Cathedral City Municipal Code imposes a tax on "every person engaged in operating or otherwise conducting any medical cannabis business" a tax of fifteen cents for each dollar of gross receipts. "Gross receipts" is defined in Section 3.48.020(C), and generally includes anything of value received from sales by a medical cannabis business.
The City is authorized to impose this medical cannabis tax by Government Code section section 37101, authorizing business license taxes. Section 37101 does not require a business license tax to be calculated based on gross receipts. Section 37101 states that if a business license tax is calculated based on income or gross receipts, then non-profit organizations that are exempt from state or federal taxation must be exempted from the business license tax. Non-profits are not exempt from business license taxes that are calculated by another method.
The medical cannabis tax was adopted by the voters at a time when only medical cannabis dispensaries were allowed in the City. Now that the City Council has adopted ordinances expanding the types of medical cannabis businesses allowed in the City to include cultivation and manufacturing sites, the City should consider amending the tax to provide different taxation methods for the different business types. Continuing with the current tax could result in lost revenues for the City and competitive disadvantages for certain medical cannabis businesses. For example, under the current tax a cultivation business that sells its cannabis to a dispensary would be taxed based on the gross receipts of that sale, and then the dispensary would be taxed based on the gross receipts of its sale to the consumer. A ver...
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