State cultivation tax repealed, county election results in
As of July 1, the $161 state cannabis cultivation tax no longer exists. The county election results have been finalized.
July 6, 2022 — As the cannabis market plummets, the state lifted its cultivation tax of $161 per pound of product, effective as of July first. Cannabis advocates say that’s an important step, but far from being enough to make the market sustainable.
And with Mendocino County’s final election results in, the assessor-clerk-recorder’s office is already looking forward to November’s general election.
Lauren Schmitt, of our sister station KMUD, interviewed Ross Gordon, policy director of the Humboldt County Growers Alliance and policy chair of Origins Council, an organization that partners with six regional cannabis trade associations in northern California, including Mendocino, advocating for changes to state cannabis policy. He says cannabis is still heavily overtaxed. “Proposition 64 established a pretty onerous state tax framework,” he opined; “which included a tax on cultivation, which was most recently $161 a pound for every pound of cannabis sold off of a farm; and also established a 15% excise tax levied at the retail level on the consumer.” In Humboldt County, Measure S, a voter initiative, allows permitted farms to be taxed at $1-$3 a square foot, regardless of how much cannabis is sold. Gordon said earlier this year, advocates campaigned to lower the Measure S taxes, “given just the general unsustainability of the tax rate, but also…the complete collapse in wholesale prices in cannabis, particularly for small farmers, going from maybe $1000 a pound to $300 a pound on average, created a situation where these taxes, which were always really onerous, have really become absolutely unsustainable.”
In 2016, Mendocino County voters passed Measure AI, which imposed a cannabis business tax of 2.5% on gross receipts per fiscal year, with minimum rates of $1,250 for 2,500 square feet, up to $5,000 for grow sites greater than 5,000 square feet. An advisory measure directed that those taxes go towards enforcement, mental health, county roads, and increased fire and emergency services. During budget hearings, the Board of Supervisors directed the auditor-controller/treasurer-tax controller to track where that tax revenue is going.
Gordon said that, although the state cultivation tax no longer exists, there is a nuance for growers who sent their product off to a distributor before July first. If a farmer has transferred cannabis to a distributor, but the product has not received its final testing, the distributor is required to return the tax to the cultivator and document the transaction. If it can’t be returned to the cultivator, then it can be given to the state.
Gordon added that, short of overturning Prop 64, which he says would cost “tens of millions of dollars,” there are still some focus points that are essential if small farmers are going to hang on. “There’s many. There’s probably a hundred,” he said; but the two main ones are direct to consumer sales, and the normalization of cannabis as agriculture.
The Origins Council is working to introduce AB 2691, legislation that would allow farmers to directly sell their product to consumers at a certain number of events per year. “If we don’t have more direct access to the consumer,” said Gordon, “I think we’re going to continue not being in a very good place, as an industry and a community.” As for normalization, “the cultivation tax, I think, is one great example of how we have policies that apply to cannabis agriculture that are not applied to other forms of agriculture.”
In county news, final election results are in, with 42.3% of the county’s electorate participating. Incumbent Mendocino County Superintendent of Schools Michelle Hutchins lost narrowly to challenger Nicole Glentzer, who pulled ahead with 55.4% of the vote.
The other incumbents remained seated, including Fifth District Supervisor Ted Williams, who defeated challenger John Redding with 82.52% of the vote, and Third District Supervisor John Haschak, who defeated challenger Clay Romero with 71.72% of the vote.
Sheriff Matt Kendall, who faced a last-minute write-in challenger in YouTube gadfly Trent James, remains in office with 85.52% of the vote.
The $13 million Anderson Valley School District bond, Measure M, also easily passed, with 71.36%.
Assessor Clerk-Recorder Katrina Bartolomie told Lauren Schmitt she’s expecting lots of taxes and initiatives on the November general election ballot, but there might not be that many candidates to choose from. Bartolomie herself was among the unchallenged candidates for offices ranging from superior court judge and District Attorney, to auditor-controller/treasurer-tax collector.
“We are also having a hard time getting candidates for our special districts,” she said. “If anybody’s interested in running for local office, that’s the place to start. And that’s coming up in November. All the community service, all the fire, all the water, all the special districts, like the Sanitation District over here, the Russian River Flood Control, and then the school districts. So November is probably going to be a big ballot as well.” The filing period for the November 2022 election is July 18 through August 12, “So the next thing I’ll be doing is updating the candidate booklet and putting that on the website so people can look at that. But we just had to get one election over with, before we start the next one.”
This story was written and edited by Sarah Reith, from interviews conducted by Lauren Schmitt, of KMUD news. Thanks to Lauren for sharing her hard work with KZYX.