Many government entities are expected to take their own cut in the form of taxes from the burgeoning cannabis industry, but San Leandro is choosing to give businesses and patients a small break.
The San Leandro City Council decided this week to start its cannabis business tax rate at a rate of 6 percent. The rate rises to 7 percent in July 2019 and again to 8 percent by 2021.
San Leandro Mayor Pauline Russo Cutter backed the tax rate that is a percent lower across-the-board over a schedule recommended by city staff that pegged the opening rate at 7 percent before topping out at 9 percent in 2021.
Last year, San Leandro voters overwhelmingly approved Measure NN, a ballot measure allowing for a tax rate capped at 10 percent.
A portion of San Leandro's reluctance to tax medical cannabis at too high a rate is uncertainty over how the city's three permitted dispensaries--all of which have yet to open its doors--will be able to succeed with lower rates charged in Berkeley (2.5 percent) and Oakland (5 percent).
Other taxes on cannabis, included on top of the cannabis business tax, is a 15 percent excise tax under Proposition 64, which legalized cannabis in the state last year, and the standard sales tax rate, which is currently 9.75 percent in San Leandro.
The city can also adjust the rate depending on how the industry, both nascent in general in San Leandro, and newly-regulated and legal statewide, reacts to the new marketplace. "I would imagine by then we'll have a better idea of what we're looking at," said Cutter, referring to the four-year tax schedule laid out Monday night.
San Leandro Councilmember Deborah Cox concurred with Cutter's proposed lower rate schedule, saying, "Six percent would put us closer within the range" of other cities.
The separate issue of how San Leandro tackles recreational sales of cannabis is expected to receive a hearing in late April, said Cutter. Meanwhile, San Leandro's second and third dispensaries, the Davis Street Wellness Center and Blum San Leandro, have yet to have locations approved by the city. Davis Street's one-year conditional-use permit expires in mid-July, while Blum San Leandro's expires in mid-October.