Proposed Commercial Cannabis Business Tax Measure
Though the County of Los Angeles (“LA County” or the “County”) has not adopted formal regulations allowing commercial cannabis businesses quite yet, in November of 2022, LA County voters will be asked to vote on a ballot measure that would impose taxes on commercial cannabis businesses in the County, if and when such businesses are permitted to operate.
As discussed in Rogoway Law’s February 17, 2022 blog entitled “Los Angeles County To Create and Implement A Commercial Cannabis Licensing Program”, the County is still working to develop regulations governing commercial cannabis businesses operating in the unincorporated areas of LA. Though no exact date for the completion of such regulations has been provided, LA County hopes to have the aforementioned regulations ready for consideration by the Board of Supervisors some time in 2023. In the meantime, in August of 2022, the Los Angeles County Board of Supervisors approved a proposed commercial cannabis business tax measure for inclusion on the November 8, 2022, general election ballot.
As noted on the LA County Consumer & Business Affairs website, assuming commercial cannabis businesses are ultimately permitted to exist in the unincorporated areas of the County, cannabis business taxes generated pursuant to the proposed tax measure will be deposited into the County’s General Fund. While the Board of Supervisors may require cannabis tax revenue to be used to support cannabis based equity programs, the tax revenue may also be allocated to support non-cannabis related County services.
Starting Tax Rates Proposed for Tax Measure on LA County’s 2022 General Election Ballot
If approved by a simple majority of voters, the proposed cannabis business tax measure would impose different tax rates on each type of commercial cannabis business. Non-cultivation businesses would be taxed based on gross receipts while cultivation businesses would be taxed per square foot of plant canopy. The charts below detail the starting tax rates proposed in the tax measure.
Starting tax rates proposed for Non-Cultivation Cannabis Businesses
| Cannabis Business Type | Starting Tax Rate |
| Retail (storefront & non-storefront) | 4% of gross receipts |
| Manufacturing | 3% of gross receipts |
| Distribution | 3% of gross receipts |
| Testing Lab | 1% of gross receipts |
Starting tax rates proposed for Cannabis Cultivation Businesses
| Cannabis Cultivation Business Type | Starting Tax Rate |
| Indoor/Artificial Lighting | $7.00 per sq/ft of canopy |
| Mixed Lighting | $4.00 per sq/ft of canopy |
| Nursery | $2.00 per sq/ft of canopy |
Maximum Tax Rates Proposed for Tax Measure on LA County’s 2022 General Election Ballot
The proposed cannabis tax measure would also create a maximum tax rate for each type of commercial cannabis business to ensure cannabis business tax rates cannot be infinitely increased over time. While the Board of Supervisors may vote to increase or decrease the applicable tax rates after July 1, 2026, and on every July 1st thereafter, the proposed tax measure would stop it from increasing the tax rates above the maximum tax rates listed in the measure. Such maximum tax rates are shown below.
Maximum tax rates for Unincorporated LA County Non-Cultivation Cannabis Businesses
| Cannabis Business Type | Maximum Tax Rate |
| Retail (storefront & non-storefront) | 6% of gross receipts |
| Manufacturing | 4% of gross receipts |
| Distribution | 3% of gross receipts |
| Testing Lab | 1% of gross receipts |
Maximum tax rates for Unincorporated LA County Cannabis Cultivation Businesses
| Cannabis Cultivation Business Type | Maximum Tax Rate |
| Indoor/Artificial Lighting | $10.00 per sq/ft of canopy |
| Mixed Lighting | $7.00 per sq/ft of canopy |
| Nursery | $2.00 per sq/ft of canopy |
Even though LA County voters will have the chance to vote on the proposed tax measure in November, it is important to remember that until such time as the County adopts commercial cannabis business regulations, all commercial cannabis business remain prohibited in unincorporated LA County.
Rogoway Law Group will continue to follow the progress of LA County’s commercial cannabis business regulations including the proposed tax measure discussed, so check back here for more updates as they become available.
