San Francisco Suspends Cannabis Business Tax Through December 2022, Citing Strength of Illicit Market
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San Francisco Suspends Cannabis Business Tax Through December 2022, Citing Strength of Illicit Market

City supervisor Rafael Mandelman said the tax suspension would help licensed businesses compete and, ideally, thrive against the pull of the illicit market.

December 9, 2021

A recent vote to suspend the San Francisco local cannabis business tax through the end of next year earned unanimous support for the measure, as KPIX reports. It was a proposal that city supervisor Rafael Mandelman said would help licensed businesses compete and, ideally, thrive against the pull of the illicit market.   

The tax was set to go into effect Jan. 1, the result of a 2018 ballot measure that local voters approved. The original ballot language proposed a 1-5% tax on gross receipts, citywide.

However, a lot has happened in the last three years in California.

Increased taxation—from the state level on down to counties and municipalities—has tied up cash flow and handcuffed licensed operators to a hefty financial imbalance, according to market observers and trade associations monitoring the post-Prop. 64 situation. Meanwhile, illicit operators are raking in $8 billion annually—double the market size of the licensed, regulated and taxable cannabis landscape in the state.  

“Cannabis businesses create good jobs for San Franciscans and provide safe, regulated products to their customers,” Mandelman said in a public statement. “Sadly, the illegal market is flourishing by undercutting the prices of legal businesses, which is bad for our economy as illegal businesses pay no taxes while subjecting workers to dangerous conditions and consumers to dangerous products. Now is not the time to impose a new tax on small businesses that are just getting established and trying to compete with illicit operators.”