California to implement ‘Death Penalty’ tax rule
Cannabis license holders in Santa Barbara County must pay quarterly taxes or risk losing their licenses.
Santa Barbara County officials are stepping up rules to get cannabis businesses to be current on their tax payments. On June 27, the Santa Barbara County Board of Supervisors approved harsher penalties on cannabis businesses that aren’t paying their taxes on time.
Beginning in August, cannabis businesses in Santa Barbara County, California that don’t pay their quarterly taxes or file the appropriate paperwork within the 30-day grace period could lose their license to operate.
“It’s that severe,” Deputy County Executive Officer Brittany Odermann told the Board of Supervisors at the June 27 meeting. “You are late. … You cannot renew.”
Supervisors unanimously voted to approve measures to increase penalties on cannabis license holders as a way to abate a growing number of failures with timely payments and report filing.
The problem of back taxes has been stacking up in the county, and not surprising, considering that fewer than a quarter of U.S. cannabis businesses are turning profit, according to Whitney Economics.
Santa Maria Sun reports that during a June 6 cannabis meeting, county staff reported that 12 operators hadn’t submitted their third quarter tax report by April 30. Three operators filed between April 30 and June 6. At that meeting, supervisors asked staff to strengthen the penalties and consequences related to timely tax reporting and payment, which are due on the last days of January, April, July, and October.
Santa Barbara Supervisors Weigh In
Some supervisors didn’t agree with the implementation of harsher penalties.
“This is not the way that we collect taxes in the county. I think we’ve gone from a kind of slap on the wrist to a death penalty,” 5th District Supervisor Steve Lavagnino said. “That would be like if you’re one day late on your TOT [transient occupancy tax], you have to shut your hotel down, or if you’re one day late on your property taxes, you gotta move out of your house.”
He added that forcing businesses out of the cannabis industry wasn’t the supervisors’ intent when they asked staff for stricter penalties.
“Our intention is to get somebody to pay the tax,” he said. “I would hope that we could come up with something that is the intent of what we’re trying to do.”
There was already a 30-day grace period built into the county’s cannabis tax system, which the new amendments wouldn’t alter. Odermann said that if taxes are due on Jan. 1, businesses have to pay them by the Jan. 30 delinquency date, which is also when the report accompanying those taxes needs to be filed.
“We’re saying if you don’t do that by Jan. 30, then there’s the death penalty,” Odermann said.
Others agreed that the rules were a bit much.
“This is a standard that, like, nobody else lives by,” 1st District Supervisor Das Williams said. “Is there any other option? … Can people essentially prepay their cannabis taxes to be out of this quarterly jeopardy? … If our goal is remedy and better collection, then why wouldn’t we allow people to pay their taxes ahead of time?”
In 2020, a grand jury in Santa Barbara, California criticized the county’s cannabis regulations in a report, citing that members of the Board of Supervisors allowed cannabis businesses to dictate policy and failed to serve the interests of county residents. The grand jury, which serves as an oversight body for county agencies, wrote in the report that it had received several requests to investigate the actions of the board in relation to the creation of the county’s cannabis regulations.
