Los Angeles County Voters Approve Cannabis Tax

Los Angeles County voters in California approved Measure C on Tuesday, which will impose a tax structure on businesses in unincorporated areas of the county once they receive permits, Los Angeles Daily News reports.

At the time of writing, nearly 60% of the votes were in favor of Measure C as the final tallies came in.

Measure C imposes several initial tax rates: 4% on gross receipts for retail operations, 3% for manufacturing and distribution, $4 per square foot for mixed light cultivation, and $7 per square foot for indoor cultivation. The Los Angeles County Board of Supervisors may decrease or increase the tax rates within the maximum approved by the voters after July 1, 2026.

It’s important to note that Measure C itself does not legalize cannabis sales in the county, with additional steps before the industry can launch. The Board of Supervisors still needs to vote on that, and they’ve indicated they plan to do so in early 2023.

“All cannabis business activity will remain prohibited in the unincorporated areas of the County until the cannabis business permitting program is launched in 2023,” the bill summary reads. “This measure would make it legal for the County to tax the revenues of cannabis businesses operating in these areas. Once the permitting program launches, a cannabis business operator will need to obtain all the required permits and licenses from the appropriate state and local regulatory agencies including a cannabis business permit issued by the Los Angeles County Office of Cannabis Management.”

The Office of Cannabis Management (OCM) under Los Angeles County’s Department of Consumer and Business Affairs is developing an equitable commercial cannabis program that includes permitting and resources for eligible applicants with a proposed launch in late 2023.

“The approach we’ve adopted will equitably distribute legal cannabis businesses in each supervisorial district and specifies that cannabis cultivation will only be permitted indoors—not outdoors in greenhouses,” Supervisor Kathryn Barger said at a recent board meeting.

“Our board must be clear: we will not tolerate illegal cannabis operations. Growers who operate illegally undermine our efforts to create a regulated and responsible cannabis industry, and often do so at the expense of the rural communities I represent. I’m firmly committed to upholding the law and will corral all available resources to enhance enforcement and abatement efforts.”

County officials estimate a total of $10.4 million in tax revenue that would go to the Los Angeles County General Fund and a cannabis equity program that would provide equitable access for entering the cannabis industry.

For the time being though, cannabis businesses remain prohibited in unincorporated areas of the county until the permitting program launches.

Any existing or newly established cannabis businesses in the unincorporated areas must register with the Los Angeles County Treasurer and Tax Collector within 30 days of commencing operation once the permitting program has launched or within 30 days after the effective date of this ordinance.

Regulations are still being developed, but Los Angeles County staff said the initial plan will likely allow for up to 25 storefront retail cannabis businesses countywide, 25 delivery retail businesses, 10 indoor/mixed light cultivation establishments, 10 manufacturing businesses, 10 distribution facilities, and 10 testing laboratories.

A similar vote also took place nearby in San Diego County.

Voters also decided whether or not to approve Measure A in San Diego County’s unincorporated areas will pay a tax that would generate revenue going toward government services such as health care, fire safety, and parks.