Introduction

On August 9, the Los Angeles County Board of Supervisors (“LACBOS”) approved a resolution to place a proposed Cannabis Business Tax (the “Tax”) on the ballot for the upcoming November 8, 2022, election.  The proposed Tax is directed at commercial cannabis businesses operating in the unincorporated areas of Los Angeles County and must be approved by a simple majority (50% + 1) of County voters to go into effect.  The following summarizes key provisions of the proposal (including applicable timelines), organized by category.

Tax Rates

The proposed Tax rates from July 1, 2023, through July 1, 2026, are as follows:

  • $7/sq. ft. of canopy for cultivation using exclusively artificial lighting;
  • $4/sq. ft. of canopy for cultivation using combination lighting;
  • $4/sq. ft. of canopy for cultivation using no artificial lighting;
  • $2/sq. ft. of canopy for nursery cultivation;
  • 4% of gross receipts for retail;
  • 3% of gross receipts for manufacturing and processing;
  • 3% of gross receipts for distribution;
  • 1% of gross receipts for testing laboratories; and
  • 4% of gross receipts for any other type of cannabis business.

Beginning July 1, 2026, LACBOS may adjust the Tax to rates less than or equal to the maximum annual rates, not to exceed the following:

  • $10/sq. ft. of canopy for cultivation using exclusively artificial lighting;
  • $7/sq. ft. of canopy for cultivation using combination lighting;
  • $4/sq. ft. of canopy for cultivation using no artificial lighting;
  • $2/sq. ft. of canopy for nursery cultivation;
  • 6% of gross receipts for retail;
  • 4% of gross receipts for manufacturing and processing;
  • 3% of gross receipts for distribution;
  • 2% of gross receipts for testing laboratories; and
  • 4% of gross receipts for any other type of cannabis business.

Beginning July 1, 2027, and each following July 1, the maximum annual Tax rates for cultivation will increase annually for inflation based on the Consumer Price Index (“CPI”) for Los Angeles County for the preceding year, and no CPI adjustment resulting in a Tax decrease may be made.

Tax Collection

  • Revenues from the Tax will be placed in the Los Angeles County general fund, and may be used for any County services;
  • Payment and tax statements for the Tax are due by the end of each calendar month;
  • Adjustments for apportionment between a business’s activities inside and outside the unincorporated parts of the County must be provided within 1 year following the Tax’s date of payment.

Registration & Renewal

  • Businesses must register with the Tax Administrator within 30 days of commencing operations or within 30 days after the effective date of the ordinance containing the Tax, and annually renew within 30 days of the Tax registration anniversary date of each following year;
  • Businesses must notify the Tax Administrator within 30 days of any changed information in their respective Tax Registrations; and
  • A business’s new owner must submit an updated Tax Registration to the Tax Administrator within 30 days of a change in ownership.

Violations

  • A violation of the Tax provisions may be prosecuted as a misdemeanor, with conviction resulting in punishment by a fine not more than $500, imprisonment for a period not more than 6 months, or both a fine and imprisonment;
  • A civil penalty of up to $1,000 per violation may also be imposed, including recovery of any Tax, interest, or penalty due to the County, and any other appropriate legal or equitable relief in a court of competent jurisdiction; and
  • An administrative fine not to exceed $1,000 per violation will also be imposed.

If you have any questions about any of the above, please feel free to contact Katchko, Vitiello & Karikomi, PC for more information and a member of the team will be happy to assist.

By Patrick Babajanian, August 25, 2022.

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