Cannabis growers tell the county they need a tax freeze for the industry to survive.

As the cannabis industry continues to thrive across California, Monterey County growers have faced a dilemma: pay a hefty cannabis business tax, or face potential closure. Meanwhile, the county Board of Supervisors also faces a dilemma: freeze cannabis taxes granting growers a reprieve, or continue on an existing path of taxing the industry, generating significant revenue for the county.

On June 21, the board unanimously approved a plan requiring cannabis growers to pay delinquent and current taxes by July 31, after the board agreed to freeze taxes the last two quarters, allowing a deferral of payment. But with the new deadline coming, growers are worried – missing the July 31 tax payment deadline means they will be disqualified from the Provisional Cannabis Business Permit Program, leading to potential immediate shutdown.

That prompted growers to band together and write a July 15 letter to the board, asking for more relief. “We request an immediate tax freeze for a minimum of one year,” the letter from six cultivators reads. “We are in a war of attrition and our survival requires that you invest in us.”

It’s not the first time the cannabis industry has asked the Board of Supervisors for relief. When Riverview Farms started converting dilapidated greenhouses for medical cannabis production in 2016, the tax was $15 per square foot; now it’s $3 per square foot indoors, and $1 outdoors. But Riverview CEO Michelle Hackett says the canopy tax is making the business all but impossible.

“How can you expect cannabis cultivators to pay you a dollar when we’re losing money daily?” Hackett asks. “This decision [to force these taxes] could make or break our industry.”

While Monterey County ranks fifth in California in the number of cannabis cultivation licenses, the number of licensed businesses has been shrinking. From 2019 to May of 2022, 24 cannabis businesses in unincorporated Monterey County closed, according to a June 15 report by Monterey County Cannabis Program Manager Joann Iwamoto.

She’ll next present to the board on growers’ ask for a continued tax freeze on July 26.

Iwamoto says the main issues to consider are oversaturation of the market and a significant decline in wholesale prices. “The combination of the two has made a very dramatic shift in the wholesale industry… those two are really what’s driving the plea from the industry to reduce or freeze the tax raise,” she says.

Last year, cannabis was the third most valuable crop in Monterey County at over $618 million, more than broccoli or wine grapes. But Bob Roach, executive director for the Monterey County Cannabis Industry Association, says that doesn’t necessarily mean growers can survive based on the current business model. “We have a commodity product, and now the supply has greatly exceeded the demand,” he says. “The [tax reductions] aren’t enough, because the prices have collapsed below the cost of production. People really haven’t had any profit since August 2021.

“It’s very expensive to be in this business – if you don’t make any profit, what do you do?”

At the same time, Roach knows the county is in a tough spot: “They want to provide relief, but there’s a limit. They need to go to the wall to save the maximum number of jobs.”