San Francisco has suspended a controversial cannabis tax to combat an illicit market, according to the city’s Board of Supervisors. The decision comes after a San Diego study found that most consumers were buying their marijuana from outside of the state due to high taxes on legal sales in California.
San Francisco has taken a daring new step to combat the illegal cannabis market: it has suspended cannabis taxation.
The San Francisco Board of Supervisors overwhelmingly adopted a resolution last week to suspend the city’s Cannabis Business Tax for the time being, citing fierce competition from the illegal cannabis market and a crime wave that has afflicted the regulated business.
San Francisco voters passed the tax in 2018, and it was set to take effect on January 1, 2022. A tax of one percent to five percent would be charged on the gross revenues of the city’s licensed cannabis enterprises under the wording of the ballot initiative.
In a statement, Supervisor Rafael Mandelman stated that delaying the tax will enable municipal firms to compete more effectively with unlicensed operations, who do not pay taxes and are not subject to other regulations-mandated expenditures such as licensing fees and lab testing expenses.
In a statement, Mandelman said, “Cannabis firms provide decent employment for San Franciscans and deliver safe, regulated goods to their consumers.”
“Unfortunately, the illicit market thrives by undercutting regular firms’ pricing, which is detrimental for our economy since illegal enterprises pay no taxes while exposing employees to unsafe working conditions and customers to harmful goods.” “Now is not the time to put a new tax on small enterprises who are just starting out and competing with illegal operations.”
Increased state tax rates are directly tied to illicit cannabis sales, according to a research from the California Legislative Analyst’s Office, according to Mandelman. Matt Hawkins, founder of Entourage Effect Capital and chairman of the board of directors for Harborside, a California licensed cannabis operator, praised the city’s action as a means to assist legal firms compete with the illicit market.
In an email to High Times, Hawkins said, “With the great majority of California’s cannabis sales coming from the criminal market, I appreciate the mayor of San Francisco for delaying the city’s Cannabis Business Tax.”
“I hope the other of California’s towns, including Oakland and other Bay Region neighbors, follow suit, since this should assist sustain the legal cannabis businesses in the area.”
Businesses in the cannabis industry in California are plagued by crime.
Cannabis companies in California, notably in the San Francisco Bay Area, have been subjected to a wave of crimes in the previous two years, with the social upheaval erupting throughout the country after the police shooting of George Floyd in May of last year. Criminals plundered and destroyed cannabis shops around the state, using the demonstrations over Floyd’s death as cover.
Dispensaries have also been the target of a number of robberies and thefts. On November 16, a gang of armed robbers broke into BASA, a San Francisco-based business, and stole thousands of dollars in items. According to Mandelman’s office, this was the site’s sixth burglary.
“Out-of-control retail thievery is wreaking havoc on cannabis companies, as well as many other stores in San Francisco,” Mandelman said.
“Before we slap a new tax on these companies, their workers, and their consumers, San Francisco ought to do more to safeguard them.”
Reduced cannabis taxes help both consumers and cannabis companies, according to Sue Taylor, proprietor of Mama Sue Wellness and a spokeswoman for Glass House Brands.
“As is customary, San Francisco is leading the charge in cutting cannabis taxation for elders and individuals in suffering,” she told High Times.
“Because of cost, many of our consumers and clients have slid into the illegal market to obtain cannabis.”
“Cannabis was inexpensive before complete legalization, but since then, the prices have almost risen for consumers,” Taylor continued.
“We are delighted to be part of this community, which prioritizes genuine people.” We also want to express our gratitude to the city for once again being a leader in identifying this as a critical problem for our residents.”
San Francisco Makes a Risky Move
Mandelman said his office will work with the City Controller’s Office, the Treasurer and Tax Collector’s Office, the Office of Cannabis, and other interested parties to assess cannabis company sales in San Francisco now that the proposal to suspend the Cannabis Business Tax has been adopted. The data would be used to create a new tax rate and structure plan, which would be submitted to the Board of Supervisors in 2023 for possible adoption.