Recreational cannabis businesses in West Hollywood will soon face higher taxes.
West Hollywood voters approved a new 7.5 percent tax on revenue for recreational cannabis businesses by a wide margin on March 5.
Mayor John D’Amico said the result was expected. City-commissioned polls showed approximately 75 percent of residents supported the tax, and unofficial election results showed more than 76 percent of voters followed through and approved the measure. D’Amico said the tax revenue, which could be up to $5.5 million per year, will go to the city’s general fund.
“We don’t know how many of our residents will be affected who use cannabis, but certainly the tax will help all of our residents by providing public safety, social services, public facilities help and [park programming],” he said.
The tax, which is levied on the businesses’ revenue and is not a sales tax aimed at consumers, will go into effect 10 days after the vote’s results are certified, which is tentatively planned for the April 1 City Council meeting.
The tax does not apply to medical cannabis. It will only apply to the recreational sales at the city’s four medicinal dispensaries.
The four medical retailers are the only cannabis businesses that are up and running, though John Leonard, community and legislative affairs manager for the city of West Hollywood, said several retailers and consumption lounges for adult-use recreational cannabis might open in the next three to four months. Those businesses will be subject to the new tax upon opening their doors, Leonard said.
Concerns have been raised by D’Amico and Jackie Subeck, CEO of cannabis edible consumption lounge Door Number Six, that the 7.5 percent tax might be too steep for fledgling businesses.
The measure allows the City Council to change the tax rate without going back to the voters as long as it stays at or below 7.5 percent, though that process would likely take some time.
“It would take quite a bit of effort to change that, but if it’s warranted, we’ll go through that effort,” D’Amico said.
Leonard said the tax is likely to be levied monthly or quarterly, though the city has not finalized a decision yet.
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