Sacramento County Voters to Decide on Cannabis Taxes in Unincorporated Areas

Millions of dollars in additional cannabis tax revenue could become available in Sacramento County, Calif., following this November’s election.

That’s because the county’s board of supervisors voted, 3-2, on July 26 to allow voters to decide the fate of a proposed ordinance that would tax cannabis and hemp business operations in unincorporated parts of the county. Since the proposal would authorize a new tax, it needs a two-thirds majority to pass. All voters in the county are eligible to cast ballots on the measure.

Should the ballot question pass, the board of supervisors would still hold the authority to establish (or not to establish) a regulated industry in the unincorporated parts of the county.

Currently, the county only allows cannabis businesses to operate within city limits, including Sacramento—California’s sixth-largest city of roughly 500,000 people.

Revenue generated from the tax would go solely toward funding Sacramento County’s homeless services, including those benefiting the American River Parkway—a 23-mile stretch that covers 4,800 acres and has been designated both a state and national wild and scenic river. The board of supervisors would not be able to divert the tax revenue elsewhere.

“I know local governing bodies want to maintain discretion over how they use funds, but to specifically dedicate these funds to deal with a crisis that is the biggest crisis this county probably ever faced, frankly, or any municipal body, I think is important,” District 3 Supervisor Rich Desmond said during the July 26 board meeting.

County officials estimate there are up to 1,000 people living in encampments on regional park properties across Sacramento County, with a large share of those along the parkway, Jefferson Public Radio reported in February.

The special tax proposal going before voters in November would include rates that do not exceed 6% for retail, 4% for manufacturing, 3% for distribution, 2% for testing, and 3% for cultivation or $10 per canopy square foot, according to the board of supervisors’ approved resolution.

Those taxes on any forthcoming cannabis and hemp operators in unincorporated parts of the county would generate an estimated $5.1 million to $7.7 million annually, according to the resolution.

While the ballot measure aims to authorize a new tax on businesses in the unincorporated parts of the county, it would also affect current delivery businesses based within city limits but extend their services throughout the county, District 2 Supervisor Patrick Kennedy said during the board meeting.

“It would actually tax regulated cannabis businesses that are lawfully operating in the unincorporated area as well as the seven cities,” he said. “That would mean the delivery business. So, we would actually be imposing taxes on businesses [already operating within city limits]. I wanted to make that clear.”

In a submitted public comment to the board of supervisors, James Hanson, the CEO of Dank City Farms LLC, a licensed cannabis delivery business in Sacramento, said he opposed the ballot measure.

“I’m extremely against an extra tax on cannabis for the homeless,” Hanson wrote. “Cannabis is the most [taxed] industry in the world. Cannabis companies are not responsible for the homeless population in Sac.”

The resolution specifically states that operators in retail sales of cannabis, cannabis products, hemp and/or hemp products, including non-storefront retailers (delivery businesses) shall be subject to the maximum tax rate not to exceed 6% of gross receipts.

The board of supervisors wouldn’t be able to overturn the tax structure once voted on this November.