SAN LEANDRO — Three approved medical marijuana dispensaries will have to pay more to operate in San Leandro now that the city has imposed a 6 percent business tax that will climb to 8 percent by 2021.

The San Leandro City Council on March 20 unanimously set a 6 percent tax on all gross receipts through June 2019. The tax rises to 7 percent on July 1, 2019, then caps off at 8 percent on July 1, 2021.

The City Council’s decision comes on the heels of the November election, when 75.23 percent of San Leandro voters approved Measure NN, which authorizes the city to impose a tax of up to 10 percent on marijuana businesses.

“We have not even gone toward permitting recreational sales, and I don’t know if we are ever going to do that. But if we do, I think whatever we decide tonight on the gross receipt for medicinal sales should then be looked at again,” Mayor Pauline Cutter said at the meeting.

“I know we have that 10 percent up there because we were thinking, if we ever went to recreational (marijuana), we would want to cover ourselves,” she added.

City staff had estimated that the annual tax could generate up to $500,000 for San Leandro if it was set at 5 to 7 percent.

Medical marijuana patients would pay the cannabis business tax on top of a 15 percent state excise tax if retailers or manufacturers decide to pass the costs on to consumers. Recreational marijuana customers, however, also would have to pay the city’s 9.75 percent sales tax, along with the two other taxes.

The state excise tax on all cannabis products was part of the November voter-approved proposition legalizing adult recreational use of marijuana in California.

Though other Bay Area cities have a cannabis business tax on gross receipts or are considering one, the rates vary from 2.5 percent in Berkeley to 5 percent in Oakland to 10 percent in San Jose.

Hayward voters in November approved an up to 15 percent tax on marijuana businesses, although none are currently permitted to operate there.

“I think, in reality, Hayward really shouldn’t be in that comparison,” Councilwoman Deborah Cox said.

“When you look at it, it’s obviously designed to discourage a business rather than have that business there, so when you look at the different figures out there, 6 percent looks like it’s closer to the middle of the range,” she said.

All three of San Leandro’s marijuana dispensary permit holders, Blum Oakland, Harborside Health Center and Davis Street Wellness Center, “voluntarily offered up gross receipt contributions at varying levels as part of their proposals,” Deputy City Manager Eric Engelbart said.

“Even if your council decided not to move forward with this tax, those three dispensaries have already committed to it,” Engelbart said at the meeting.

“This new tax would create a new level playing field that would be in lieu of all those other voluntary contributions that have been offered, so this would create a standardized rate for all cannabis businesses,” he said.

A broader discussion on adult recreational marijuana use is scheduled for an April 24 City Council workshop, including whether the city’s three dispensary permit holders should be allowed to sell products to recreational users along with medical marijuana patients. None of the three dispensaries have opened yet.

Th council will discuss proposed zoning code changes for non-retail marijuana manufacturing and laboratory testing businesses at its May 1 meeting.

“I certainly wouldn’t want to drive out some of our businesses because the cost of rent went up as the result of a certain type of business moving in,” Councilman Pete Ballew said.

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