Long Beach is considering repealing its cannabis cultivation tax—which charges businesses that grow and harvest cannabis $12 per square foot.
On Tuesday, March 15, the Long Beach City Council unanimously requested the city manager conduct a feasibility study on the impacts of repealing the tax.
The cultivation tax was first implemented in 2016 when voters approved Measure MA, which taxes various cannabis activities in Long Beach and brings the City millions of dollars in revenues each year.
Cannabis growers are also taxed an additional $161 per pound of dried cannabis flower by the state, making cannabis the only industry in Long Beach which is taxed based on the cultivation of its products.
“Imagine taxing local farmers for every fruit and vegetable harvested,” Councilmember Al Austin said, noting that the current taxation was a “broad burden” to cannabis growers. “Not only would the profits and prices at local farmers’ markets increase, but the grower is essentially being fined for successfully growing food.”
In 2019, the City Council reduced cannabis business license taxes for non-retail cannabis businesses (distributors, manufacturers and lab testing facilities), despite a projected $220,000 to $350,000 loss in revenue.
Instead, revenues went up. In fiscal year 2020, revenues from cannabis fees and taxes increased by $5.6 million. (The council also extended dispensary operating hours in late 2020.) The next fiscal year, the revenues increased an additional $1.8 million.
During public comment, residents lauded the potential repeal of cultivation taxes, with some pushing for a repeal of other cannabis taxes as well.
“Unfair taxes are driving the cannabis industry to the point of near collapse, especially our farmers,” said Samantha Kohler, who works at a Catalyst dispensary.
She said that high taxes were causing “millions of pounds of products” to be wasted due to the inability of growers to compete with black market prices.
“Right now it’s a new industry. The oil industry doesn’t get this kind of treatment—liquor, tobacco. Why cannabis?” said Jose Hernandez, who works in Long Beach. “Why are we the scapegoats to try to solve all the problems in the state?”
Councilmember Suzie Price welcomed the feasibility study, but wanted to make sure that staff included revenue projections for multiple years. She lauded the City’s prudence in regards to cannabis taxation, allowing council members to be “very deliberate at every stage.”
“Ultimately the reasons we discussed the taxes to begin with were all related to city revenue,” Price said. “So ultimately we need to know that information as we move forward, if in fact we do make a change here.”
City staff will study the feasibility of repealing the cannabis cultivation tax and report back to the Budget Oversight Committee in 90 days.
