Sonoma County officials have taken another step in providing tax relief for struggling marijuana cultivators. The number of licensees has shrunk by nearly two thirds due to the heavy state and local taxes.
The Press Democrat reported that this week, the County Board of Supervisors lowered the gross revenue tax for cannabis farmers to only 2.5%, a 45% decrease.
This move was made as a result of pressures from industry, which warned that businesses are at risk of returning to the illegal market in order to survive. The Press Democrat reported that the number of cultivators licensed in Sonoma County had dropped to 66, from 155 by May 2023.
The Press Democrat reports that the tax rate on outdoor cultivators will drop to 36 cents from 69 cents. Rates for indoor growers, meanwhile, will decrease from $7.58 to $3. After a second vote by the board to confirm that ordinance was passed, rates are set to go into effect on July 1.
Since 2017, the County Board has made four adjustments to the Cannabis Tax Rate. However, this is the first time they have permanently reduced rates. The previous reduction of the rate in 2022, however, was only temporary.
A county marijuana program officer told the board that the move was intended to stabilize the local cannabis market. He cited the generally decreasing wholesale prices of cannabis in California. A county official told the board that outdoor marijuana flowers have dropped in price to just $143 a pound from 277 last year. Indoor flower is now available for only $240, down from 606 one year before.
Sonoma County has become the latest California municipality to lower taxes on marijuana firms in financial trouble in the past few years. Desert Hot Springs in Southern California is also considering another cannabis tax cut to help dispensaries this month. The current rate of 10% will be reduced to 5%. Even the city’s Mayor backed up this tax reduction.
California cannabis businesses are also apprehensive about the summer months, as the state’s marijuana tax is set to rise on July 1. It will go from a 15% rate of excise to a 19% rate if the Legislature does not take any action.