SAN DIEGO — San Diego would join several other large California cities that impose local taxes on marijuana businesses if voters approve a proposed November ballot measure that Councilman Mark Kersey will unveil on Monday.
Kersey said the tax, which would start at 8 percent of gross receipts and could rise to 15 percent at council discretion, would help cover costs for code enforcement officers, police and other city workers who monitor and regulate marijuana businesses.
Marijuana advocates and local proprietors didn’t immediately condemn the idea, but warned that excessive taxation of legal marijuana would inflate prices and could help foster a more robust black market for the drug.
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Opponents of legal marijuana expressed strong opposition to the proposal, citing similar concerns about a larger black market and contending that the government taxing marijuana further legitimizes a harmful drug that remains illegal under federal law.
Kersey’s proposal comes with Californians facing a likely November ballot measure that would legalize recreational use of marijuana in addition to medical use, which state voters made legal in 1996.
“With the whole landscape changing, now is probably a good time to have this conversation,” said Kersey. “Legalizing recreational use will increase demand, so I think it’s likely you’ll also see an increased demand for these kinds of city resources to monitor and regulate this industry.”
Council President Sherri Lightner agreed.
“Many other California cities are adopting similar taxes on the sale of cannabis in anticipation of the use of recreational marijuana being approved statewide by voters in November,” she said. “I believe this is a common sense proposal that will benefit San Diego by generating additional tax revenue that can be used for major city needs such as public safety and infrastructure.”
Other cities with local marijuana taxes include Los Angeles, San Jose, Oakland, Sacramento, Long Beach, Berkeley, Palm Springs and several smaller cities. San Jose’s tax generated $17 million between 2011 and 2015. San Diego would be the first city in the county to take this step.
The taxes range from 6 percent to 15 percent. They are on top of traditional California sales taxes that legal marijuana businesses have had to pay since 2001, which is 8 percent in the city of San Diego.
The statewide recreational marijuana measure, known as the Adult Use of Marijuana Act, would also impose a 15 percent state tax on retail sales of recreational marijuana.
So if voters approve both the state and local measures, marijuana sales would be subject to a 31 percent tax surcharge at legal recreational dispensaries in the city of San Diego.
That number has raised some eyebrows among the United Medical Marijuana Coalition, which includes the owners of many of the 14 legal dispensaries approved by the city.
“The coalition is currently extremely concerned about the pressure black-market dispensaries and deliveries are putting on city-licensed storefront cooperatives that are abiding by all regulations and bearing the expense that comes with it,” said Rachel Laing, a spokeswoman for the group. “The danger is that adding double-digit taxes could further advantage the black-market operators — driving the legal, tax-paying providers out of business. We’ll be advocating for an approach that addresses those concerns.”
Laing said, however, that the group is optimistic Kersey understands their concerns and will make appropriate adjustments.
“We’ve had constructive initial conversations with Councilmember Kersey’s office about this proposal,” Laing said. “As San Diego’s only legal, tax-paying cannabis business operators, our members have valuable insight and data that can inform the city’s framework for a tax, and thus far we’re optimistic they’ll take our input into consideration as they craft the ballot measure.”
