More than 60 percent of cannabis cultivators in Monterey County owe unpaid taxes to the county, a reflection of a once-booming local industry facing oversupply and variable market conditions. Responding to the industry’s cries for aid, county officials are preparing a tax structure overhaul they hope will offer temporary respite.
The Board of Supervisors unanimously voted on July 26 to retroactively slash its per-square-foot tax rate on cannabis cultivators dating back to the second quarter of fiscal year 2021-22. The plan, which supervisors are expected to codify on Aug. 23, would refund $384,000 in collected tax revenue back to cultivators who already paid their taxes under the old rates, and require those late on their taxes to pay in full by Jan. 31, 2023.
Under this new structure, the county would take an $8.6 million hit against the $19 million it projected to earn through cannabis tax revenue in fiscal year 2021-22. Prior to her vote, Supervisor Mary Adams said she hoped the plan would provide relief, but said she was worried cultivators would be back in the same position in a few months. “I don’t know what’s going to happen to change things, I really don’t,” Adams said.
The board’s action is short of what local industry leaders pleaded for: completely wipe out the tax debt and retroactively reduce the fiscal year 2021-22 tax rate to $0, allowing cultivators a clean slate as they head into the new fiscal year. The proposal was also backed by the county’s elected treasurer and tax collector, Mary Zeeb.
Although the supervisors showed little appetite for debt forgiveness – citing, in part, concerns over violating Measure Y, the voter-approved referendum that brought cannabis cultivation to Monterey County with tax revenue to fund county services – supervisors acknowledged the tightrope walk ahead between keeping the industry’s long-term prospects afloat while making sure the government is continuing to receive cannabis tax revenue.
Attorney Aaron Johnson, who specializes in cannabis, says if they’re going to maximize revenue, the county needs to find the still-elusive sweet spot between allowable square footage and tax rate. However, Johnson says the county also needs to review how much it relies on cannabis tax dollars.
“We told them at the start to treat cannabis tax revenue as one-time dollars, because it wasn’t always going to be there,” Johnson says. “And it sure as hell isn’t.”