SLT City Council delays decision on cannabis taxes, requests more information

The good news, South Lake Tahoe City Council approved an adult-use cannabis ordinance at their special meeting Monday.

What hasn't been worked out yet is how much to charge the different types of cannabis businesses to operate, and how product and surrounding services will be taxed.

During Monday's meeting of the Council, Tim Cromartie of Hdl Companies gave a presentation on proposed tax policies for the South Lake Tahoe cannabis industry. The company, based in Diamond Bar, California, helps clients analyze sales tax, property tax, assists with recovering lost revenue, as well as consulting with communities as they create cannabis regulations and taxes.

Cromartie and City Director of Finance Debbie McIntyre made presentations to the Council as they prepare to establish a tax to go on the November 6 ballot.
The goal of the tax is to generate proceeds to offset costs, but low enough to avoid over taxing and ensure sustainability, and high enough to bring in some revenues. Cromartie gave them three scenarios of each tax, very conservative, conservative and aggressive.

Depending on which tax the Council decides to use, they could possibly bring in an extra $435,000 to $700,000 revenue for the general fund.

Cannabis businesses already have to pay fees to be in the industry, and taxes for the products, whether they are in cultivation, retail sales, microbusiness or testing. Cromartie recommended matching neighboring communities for ideas, and no matter what is decided, keep it frozen at the amount to stabilize the market.
He suggested that local taxes remain low so businesses can be successful, especially since they have to pay such a high State tax rate.

Because of those taxes, Cromartie estimates 30 percent of current illegal cannabis businesses will stay in the black market. This is already showing at the state level where business is 50 percent of projected revenues six months into legal sales.

Oliver Starr of South Lake Tahoe said the price of cannabis has gone from $3,000 to $4,000 a pound to about half that since it became legal in California. He said suggested taxes on cultivation businesses were too high, but the taxes on other parts of the industry were perhaps too low.

“There is an active black market ‘right in our backyard,” said Cromartie. “We want to encourage people to use licensed businesses, so taxes need to be low. Don’t want to drive all underground.”

The City Council listened to the presentations and evaluated all levels of tax rates but asked for more information from Hdl CO so they could make the right decision for the community at their July 17 meeting. Development fees and other charges do not have to go to the voters, but any type of tax does.