US (CA): City adopts tiered tax for cannabis businesses

Cloverdale’s cannabis businesses are going to see a decrease in city taxes, following a 3-1 vote by the Cloverdale City Council on March 23. The council gave the green light to a resolution that amends the city’s existing blanket cannabis excise tax rate of 4.5% for cannabis businesses in favor of a tiered tax rate that varies tax amount by type of cannabis business.

New rates
The amended, tiered rates are as follows:
●      3% for cultivation
●      1% for manufacturing
●      1% for distribution
●      3.5% for retail (storefront and non-storefront) and delivery
●      1% for other cannabis businesses allowed per the city’s municipal code

Type 12 businesses, or microbusinesses, will be treated slightly differently, City Manager David Kelley said, since they can operate as three different subtypes. “What we propose is that the tax rate structure varies based on the sub-license type of the activity permitted under the Type 12 license,” Kelley said. Microbusinesses do at least three of the following activities at one location: cultivation up to 10,000 total square feet; manufacturing; distribution or distribution transport-only; storefront or non-storefront retail.

According to the city council’s March 23 agenda, “If the Type 12 cannabis business was 50% retail/25% manufacturing/25% distribution in March, and the business received $1,000 for rent (gross revenue) in March, that rent would be attributed $500 (50%) to retail, $250 (25%) to manufacturing, and $250 (25%) to distribution. The tiered cannabis excise tax would in turn be applied to the gross revenue based on the allocation of the business activity as follows: retail - 3.5% of $500; manufacturing - 1% of $250; distribution - 1% of $250.”

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