City Council
MEETING DATE: 10/28/2015
TITLE:
Title
Compliance Review/Audit of Gross Receipts for Cannabis Dispensaries
End
FROM:
Tami E. Scott, Administrative Services Director
RECOMMENDATION:
Recommendation
Staff recommends the City Council authorize staff to engage MuniServices to complete a compliance review and audit the gross receipts for cannabis dispensaries for compliance with City Ordinance 742. The estimated annual expense to the City is $86,250 for three dispensaries. Subsequent years will cost the City $7,750 per existing dispensary.
Body
BACKGROUND:
Voters approved Measure N at the November 4, 2014 General Election. The passage of Measure N resulted in ordinances 738 and 742 that added Chapters 3.48 and 9.108 to the Cathedral City Municipal Code. Ordinance 742 authorizes the City to impose a tax on the proceeds of cannabis and marijuana collectives, as defined in the Ordinance, in the amount of fifteen cents (15) for every dollar of proceeds. Ordinance 742 allows the Council to set the tax at a rate that is less than 15%. On August 26, 2015 the City Council set the rate at 10%, as well as establishing penalties and interest charges for late payment. On August 12, 2015 the City Council decided to reverse the ban on cash transactions that was written into Ordinance 738, with the additional requirement that software approved by the City Manager or designee be utilized to allow for tracking of all marijuana products from "seed to sale". The change went into effect October 9, 2015.
DISCUSSION:
Many businesses in this industry are heavily cash based because of difficulties with banking due to federal laws. They have weak internal controls, lack fluent audit trails and have inadequate books and records. It is critical that the correct software, processes and controls are implemented to track the flow of cash and products. The dispensaries are required to use a software package for tracking all marijuana produ...
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