San Francisco suspends cannabis tax to combat illegal sales

in an attempt to curb illegal cannabis sales, San Francisco city officials unanimously approved an ordinance to suspend the Cannabis Business Tax until the end of 2022.

According to Supervisor Rafael Mandelman, the proposal's author, suspending the tax for city businesses will help support legal cannabis retailers who are fighting competition from cannabis sold illegally.

November 2018, San Francisco voters had passed a citywide tax of 1 % to 5 % on the gross receipts of cannabis businesses, in addition to taxes on growers and wholesalers, to take effect on January 1, 2022.

«Cannabis businesses create good jobs for San Franciscans and provide safe, regulated products to their customers,» Mandelman said in a statement.

«Unfortunately, the illegal market thrives by undercutting the prices of legal businesses, which is bad for our economy because illegal businesses don't pay taxes while subjecting workers to unsafe conditions and consumers to dangerous products. Now is not the time to impose a new tax on small businesses that have just set up shop and are trying to compete with illegal operators.»

Mr. Mandelman's office relied on on a report published on December 19 by the California Legislative Analyst's Office, according to which the increase in the state's cannabis tax rates is directly linked to illegal cannabis sales.

In addition to illegal sales, the increase in theft from crops and dispensaries is also a problem.

«Cannabis businesses, as well as many other San Francisco retailers, are struggling under the weight of burglaries,» a declared Mr. Mandelman. «San Francisco needs to do more to protect these businesses, their employees and their customers before we hit them with a new tax.»

Once the legislation goes into effect, Mandelman said his office will then work with the city comptroller's office, the treasurer and tax collector's office, and the cannabis office to analyze data on cannabis business sales in the city.

The goal would be to present the Board of Supervisors with a set of recommendations on the tax rate and structure for cannabis retailers and implement a new plan for 2023.