Cannabis Compliance

In April of 2023, the City Council temporarily reduced the cannabis cultivation taxes by 50% for the current tax period, from $10.20 per sq. ft to $5.10 per sq. ft. to allow some relief to the industry while staff worked to bring back recommendations to help support the long-term viability of the industry.

On July 5th, 2023, staff recommended the following amendments to the cannabis tax structure and cannabis ordinances to address the ongoing concerns of the cannabis industry:

1) Permanently modify the definition of cultivation space, for tax collection, to encompass “canopy space” vs. the city’s current methodology of taxing the full square footage of “space utilized” in connection with the cultivation process.

2) Permanently reduce the cannabis cultivation tax rate from $10.20 per sq. ft. of “space utilized” in connection with the cultivation process to $7.50 per sq. ft. of canopy space.

3) Align the city’s security requirements to mirror state law for cultivation, manufacturing, and distribution facilities.

4) Allow for a 6-month ramp-up period for new businesses to phase in canopy space, to calculate tax liability, as new rooms are brought online within a facility.

The City Council voted to adopt staff recommendations except for the tax rate. Additionally, the City Council modified the definition of space.

On November 7, 2023, the City Council approved a second temporary reduction in cannabis cultivation tax for the July – December 2023 tax period.

DHSMC 3.33.030 Space.

“Space utilized in connection with the cultivation of marijuana” shall mean any horizontal canopy space used space ground, floor or other surface area (whether horizontal or vertical) which, is used during the marijuana germination, seedling, vegetative, pre-flowering, flowering, and harvesting phases related to the growth cycle of the marijuana plant, to include areas where live plants are present. including without limitation any space used for activities such as growing, planting, seeding, germinating, “Space” shall exclude the area used for lighting, warming, cooling, aerating, fertilizing, watering, irrigating, topping, pinching, cropping, curing or drying marijuana or any such space used for storing any products, supplies or equipment related to any such activities, no matter where such storage may take place or such storage space may be located, including temporary storage of marijuana plants.

Temporary Reductions to Cultivation Tax Rates (2023)

1. In April of 2023, temporarily reduced the cannabis cultivation tax rate from $10.20 per sq. ft to $5.10 per sq. ft. for the January- June 2023 tax period.
2. In November of 2023, temporarily reduced the cannabis cultivation tax rate from $10.20 per sq. ft to $7.50 per sq. ft. for the July – December 2023 tax period.