7 Points cannabis cultivation present the Woodlake city council with temporary tax reform options to help the struggling cannabis industry at the local level
WOODLAKE – Many cannabis companies across the state are struggling with high taxes, most of which come from the state. At the Woodlake City Council meeting last week, cannabis cultivator 7 Points presented council with information regarding cannabis taxes, the effect they have on the industry and proposed additional tax breaks at the local level.
“There are state taxes and there are local taxes and we pay both in addition to an excise tax,” 7Points CEO Wayne Bishop said. “The real fight is at the state level, but it takes a long time to make a change and this industry doesn’t have that much time.”
At the city council meeting on April 25, Bishop presented council with a presentation explaining where the need for help is. He also showed what other counties throughout the state have done to help their local business owners. Along with other dispensaries in the area, Bishop asked the council to consider a three year break on all cannabis taxes. Additionally, their desire is to redirect all cannabis taxes that are collected to put them back into the industry to make it more robust. After implementing these changes, the items would be brought back for reevaluation in three years.
Bishop said they have had an extremely tough year, the worst he has seen in the industry. Bishop also said there are a lot of farmers that aren’t going to make it and there are already businesses collapsing. Bishop said his company is currently struggling with the cultivation tax, paying around $160,000 a year, without any help. “From my perspective at the cultivation level, we’ve had no tax break,” Bishop said. “If it isn’t for flower[the plant], nothing else gets made.”
Woodlake Community Service Director Jason Waters explained that at the end of every year, the city looks at their tax structure and reevaluates it where they see fit to make sure the rates are still competitive, “We always tell our businesses that anything within our power, that is feasible, the city is going to do to be fair on taxes,” Waters said. “We’re never going to be the most expensive places to operate, because we know we have to stay competitive.”
In recent years, the city has lowered the tax rate for distribution and manufacturing. The reason they have not lowered it when it comes to cultivation is the city still sees that area as competitive in relation to surrounding areas.
Waters said it would be hard for the city to completely stop all the taxes on the cannabis industry because it was a voter approved tax measure. The taxes imposed on the industry are used specifically for parks and recreation, public safety and upgrades around town. Voters decided on the scale in which those in the industry would be charged, allowing cities to be competitive with their rates. Waters said their rates are either on the lower end or the same level as surrounding areas.
City administrator Ramon Lara explained in the meeting that the city is doing all they can to assist the industry. The city helps anyone in the cannabis industry get to a point where they can build their revenue as quickly as possible and has their best interest in mind. Lara expressed that he feels the city has done a lot for the industry not only from a tax standpoint, but also from an infrastructure and overall standpoint as well, “I do think that the city is to a point where it’s also done as much as it can do without putting ourselves in a tough spot,” Lara said.
Bishop’s presentation explained that as of Jan. 1 of this year, cannabis was taxed at a flat rate, which is more than $160 per pound. This tax is in addition to a 15% excise tax, local cultivation, processing, manufacturing, distribution and retail taxes. The presentation also explained that cultivation tax on cannabis is determined by weight, “growers have noted that the tax burden doesn’t decline as the value of their crop declines amid competition with these unlicensed growers.”
Several counties have enacted different methods of relief for the cannabis industry. Bishop’s presentation gave several examples of ways the areas like Humboldt, Sonoma and Berkley have helped the industry. Some of which included postponement of first-quarter taxes, temporary one year tax reductions and some overall reductions as well.