Hundreds of cannabis farmers in Humboldt County, California, are facing a critical deadline to settle long-overdue cultivation tax debts or risk losing their business licenses. The impending March 31 cutoff requires growers to clear outstanding payments tied to Measure S, a tax initiative approved by voters in 2016 when the cannabis market was far more promising.
Widespread Tax Debt Among Growers
Data obtained by the Humboldt County Growers Alliance (HCGA) through a Public Records Act request reveals that over 75% of the county’s approximately 1,000 permitted cannabis cultivators are struggling with tax debt. The average outstanding balance per operator is around $12,000, with some growers owing over $150,000. In total, unpaid taxes from 2017 to 2021 exceed $17 million.
This financial burden mirrors a broader statewide issue, with cannabis businesses across California owing more than $1.3 billion in unpaid taxes and penalties, according to the state’s Department of Tax and Fee Administration.
The Consequences of Non-Payment
Of the 765 licensed cultivators with tax debts in Humboldt County, 415 have entered into payment agreements, while 350 have failed. County officials, including Supervisor Steve Madrone, believe many of these businesses have been abandoned entirely, with owners walking away from their operations and properties.
“These growers have vanished, leaving behind environmental and financial disasters,” Madrone stated. “There will be no forgiveness for those who have completely disregarded their obligations.”
A critical county board meeting on March 25 will determine enforcement measures, which may include license suspensions and revocations. Alternatively, the board may consider extending relief to struggling businesses.
The Legacy of Measure S
Measure S introduced a tiered tax system based on cultivation type:
- Outdoor cultivation: $1 per square foot
- Mixed-light cultivation: $2 per square foot
- Indoor cultivation: $3 per square foot
At the time, cannabis businesses were optimistic about federal legalization, increased banking access, and market expansion. However, these expectations largely fell flat, and the legal cannabis market has since faced declining sales, falling wholesale prices, and limited retail access. Currently, nearly 60% of California’s 539 municipalities still prohibit cannabis businesses, limiting opportunities for legal operators.
Recognizing these economic struggles, Humboldt County supervisors suspended the Measure S tax for two years in November 2022. Payments and penalties from previous years were deferred, and tax rates were temporarily reduced to:
- Outdoor cultivation: $0.10 per square foot
- Mixed-light cultivation: $0.20 per square foot
- Indoor cultivation: $0.30 per square foot
Struggles and Payment Plans
Many cannabis businesses cite ongoing financial hardships as the primary reason for tax delinquency. For example, Talking Trees Farms, one of the region’s first licensed cultivators, has been forced to transition from indoor to outdoor growing to cut costs. Founder Craig Nejedly reported that retailers and distributors owe his company hundreds of thousands of dollars in unpaid invoices, making it impossible to pay his $30,000 Measure S tax bill from 2020 and 2021.
“It was a total shock when I received the tax bill last year,” Nejedly said. “We never even saw those invoices before.” He has since made a minimal payment to remain compliant but hopes for an interest-free payment plan or debt relief.
Industry Leaders Call for Solutions
Natalynne DeLapp, Executive Director of HCGA, has urged county officials to recognize the significant contributions of cannabis businesses. From 2017 to 2021, Measure S generated over $55 million in tax revenue, benefiting local government programs and infrastructure.
“We don’t want to lose our community of farmers,” DeLapp emphasized. “Humboldt’s cannabis industry has put the region on the global map, and keeping these businesses alive is critical.”
Meanwhile, some compliant cultivators, like Mattole Valley SunGrown, have prioritized tax payments despite financial strain. Owner Dylan Mattole believes those who stayed compliant should receive incentives, an idea Supervisor Madrone supports.
The March 31 deadline looms as a pivotal moment for Humboldt County’s cannabis industry. Whether the county chooses to enforce penalties or extend relief, the decision will have long-lasting consequences for local farmers and the broader cannabis market.