Costa Mesa Issues a Temporary California Cannabis Tax Reduction
Costa Mesa’s Cannabis tax reform is setting the standard for other California cities. On March 3, 2020, the City Council voted to permanently reduce taxes for local Cannabis manufacturers and distributors 6% for 1% and local testing laboratories to 0%. This vote follows Long Beach’s vote to reduce Cannabis gross receipt tax on all business types to 1%.
Competition with the Illicit Market
With the illicit Cannabis industry taking a large amount of their customer base, this reform will help Cannabis businesses compete with the illicit market, provide fair wages to employees, and give back to the community. Prior to the vote, some California Cannabis businesses were paying up to 70% in taxes on gross receipts and spending thousands of more dollars annually. These lower taxes give current businesses the opportunity to grow and they also encourage other businesses to open in the Costa Mesa area.
“I want Costa Mesa to be in a position to benefit from what could be a growing market,” Costa Mesa Councilwoman Arlis Reynolds told LA Times. “The cannabis industry is an important, rare potential revenue resource. I worry that if we don’t act quickly and closely with our industry partners … that we lose the opportunity to benefit from that revenue resource. I want to signal that starting your business in Costa Mesa [and] keeping your business in Costa Mesa is a smart investment.”
Future Cannabis Reforms
In addition to the current tax reform, Costa Mesa City Councilmembers seemed open to the possibility of expanding the scope of permitted Cannabis activity. It is likely that licensing other industries such as retail (including delivery) and cultivation to operate in Costa Mesa would require voter approval first.
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