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Cannabis distributors are warning other business owners in San Diego about what they are calling a “double-taxation” situation that has significantly raised the cost of doing business. Distributors are worried more cities will start adopting the practice, which will likely lead to increased market instability in the state due to reduced profit margins and higher product costs for consumers.
In 2018, San Diego initiated a formal policy that required distributors delivering cannabis products to retailers located within the city be liable for at least a percentage of its municipal 5% marijuana gross receipts tax. This policy also covers distributors who aren’t licensed by the city.
Distributors outside of San Diego already pay taxes in their own respective jurisdictions on marijuana products. But San Diego’s extra tax adds additional costs to inventors and business owners in California’s legal cannabis industry.
According to Chris Coulombe, the CEO of Santa Rosa-based distribution firm Pacific Expeditors, “Right now, you’ve got your top 10% (of the industry) that are probably doing all right, and then you’ve got the rest of us still trying to figure out how to make it. And these taxes are not helping.”
Sand Diego’s method of taxing cannabis distributors demonstrates how strict local governmental control over the recreational marijuana industry can have substantial effects that many business owners didn’t anticipate when California legalized marijuana in 2018.
Speak to Our Cannabis Business Law Attorneys Today
At Purdy & Bailey, LLP, we are committed to helping clients keep up with major legal changes to the cannabis industry so they know how to protect their business interests. If you need experienced and knowledgeable counsel to help you start or grow your marijuana distribution business, then you should stop by our law office to speak with a seasoned legal professional.
Call (858) 360-7080 to request your initial consultation with our legal team in San Diego.