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Cannabis tax headed to the November ballot

by Steven Felschundneff | steven@claremont-courier.com

Claremont residents will have the opportunity to approve a tax on cannabis businesses in town if they approve a ballot measure authorized by the city council on Tuesday.

The measure will be on the November ballot and will require just a nominal majority, 50% plus one vote, to pass.

The proposed retail tax would apply to both storefronts and delivery services, with a range of 4% to 7%. Voters will be asked to approve a range rather than a fixed rate to give the council flexibility in tailoring the final rate to match market conditions.

For non-retail cannabis businesses, the tax would be based on either gross receipts, or for cultivation, the square footage of the grow area.

Per city ordinance, there are currently no cannabis businesses in Claremont so the tax would only go into effect if at some point that policy changes.

“The proposed Ordinance would not allow such businesses; rather, it would merely establish tax rates if such businesses were allowed in the future through the adoption of cannabis-related business and land-use regulations,” according to the staff report.

The action was taken in part to circumvent the possibility that a citizen-based initiative would have deprived the council of autonomy over cannabis businesses.

The Claremont City Council approved the ordinance, 4-1, with Mayor Pro Tem Ed Reece voting no because he wanted to include a wider range in the tax.

David McPherson, from the consultant firm HdL Companies, gave the tax ordinance presentation, and stressed the proactive approach so the city has flexibility to address adult use of marijuana, illegal activity, legislative changes and regulatory changes, as well as future trends and policies.

The tax measure can be tailored to allow for changes in technology, evolving hemp regulations, potential potency restrictions, regulation of manufactured products, changes in consumer behavior and banking and tax payment processing.

It’s important to set the tax rate at just the right amount. Too high and customers will shop elsewhere or buy from the black market. Too low and it won’t generate enough revenue.

The city estimates the ordinance could generate between $400,000 and $700,000 annually.

“Because the City of Claremont does not currently permit cannabis businesses (except cannabis deliveries from non-Claremont businesses), it is difficult to estimate the tax revenue the proposed cannabis business tax would be generated for the City. If the City continues to prohibit cannabis businesses, and does not pursue taxes from outside cannabis non-storefront retailers, annual tax revenues would be $0. If the City permits cannabis businesses in the future, tax revenues would vary greatly depending on the number and type of businesses allowed,” according to the staff report.

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