San Leandro proposes tax rate on cannabis purchases

San Leandro’s initial tax rate on cannabis
purchases could start at 7 percent, according
to a city staff report.

San Leandro city staff is proposing a tax rate on cannabis purchases that would exceed Oakland and Berkeley.

Next week, the San Leandro City Council will be presented with a cannabis business tax that would begin at 7 percent of gross receipts through June 2018 and gradually increase to 9 percent by 2021, according to the proposal.

The two East Bay cities with the largest number of cannabis dispensaries–Berkeley and Oakland–currently tax purchases at 2.5 percent and 5 percent, respectively. San Leandro’s proposed rate would eventually rival San Jose, which taxes cannabis at 10 percent. The rate is still well below Hayward, which does not permit dispensaries, but nonetheless asked voters last fall to approve a 15 percent tax on future use.

San Leandro, meanwhile, has issued conditional-use permits for three dispensaries. Harborside San Leandro is slated to open soon, while two others, Blum San Leandro and the Davis Street Wellness Center, have not yet settled on locations.

The uncertainty over the San Leandro dispensary’s ability to compete with the proposed 7 percent tax rate while neighboring cities charging lower rates is a reason for the gradual increases, said a city staff report.

Under the plan, San Leandro’s tax rate would start at 7 percent until the end of June 2018, then rise to 8 percent through June 2019 before topping out at 9 percent in 2021.

Last year, San Leandro city staff estimated passage of a cannabis business tax, based on the full 10 percent rate allowed by the ballot measure, would generate roughly $500,000 in additional annual tax revenue.

More than 75 percent of San Leandro voters approved Measure NN last November allowing the city to tax cannabis businesses. At the same time, statewide voters also approved Proposition 64, which includes an additional 15 percent excise tax on cannabis-related purchases.