In an effort to combat the cannabis black market in California, the San Francisco Board of Supervisors voted to suspend cannabis business tax through the end of 2022. Supervisor Rafael Mandelman spoke to local reporters about this upcoming change for the next year. 

“Cannabis businesses create good jobs for San Franciscans and provide safe, regulated products to their customers,” Mandelman explained. “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.”

Recent reports show that the black market is making $8 billion a year, while the legal market is making around half that. Mandelma and other supervisors say the increased tax on cannabis businesses has a direct correlation to the increase in black market spending. This puts individuals in danger as products are unregulated and could contain potential contaminants, such as fentanyl. Additionally, during extended droughts, when water is limited, illegal cannabis farms are found to be stealing water from neighborhoods and businesses.

Changes

The tax break for cannabis businesses is set to begin January 1, 2022 and run through the entire year until December 31. This will help businesses get back on their feet as the Covid-19 pandemic still grips the world. By getting back on their feet, stores can operate with more hours and hire more employees to help run the business successfully. Not having to pay high taxes will keep more money in the business to help them gain a profit and grow. 

An additional tax was supposed to begin on January 1. Approved in 2018, the tax would add one to five percent to taxes based on sales. When originally approved, no one had any idea how the market would change. From high license fees limiting those who can enter the California cannabis market, to Covid-19 and the black market, things haven’t gone as many lawmakers thought. That’s why they pushed for the tax break for businesses in San Francisco. 

Banking

Also by cutting taxes, stores can set up better security systems. In the past few months, San Francisco businesses have seen a rash of robberies focused on cannabis retailers. One reason is because of funds. Cannabis businesses operate only with cash. There are no banking protections for anyone involved with the cannabis industry.

The U.S. House passed the SAFE Banking Act in the National Defense Plan to create protections for businesses and banks. Then businesses could streamline their banking process and not operate solely on cash. Because of their restricted bank use, there are large amounts of cash at each retail store. This has caused the increase in robberies, jeopardizing workers and businesses in San Francisco. However, the Senate removed this provision from their version of the National Defense Plan. This left advocates and other lawmakers disappointed as another year passed without banking protections. 

“Cannabis businesses, along with many other retailers in San Francisco, are struggling under the weight of out-of-control retail theft,” Mandelman commented. “San Francisco needs to do more to protect these businesses, their employees, and their customers before we hit them with a new tax.”

Future

City workers and the Board of Supervisors continue to work to help San Francisco. Removing cannabis business tax is crucial to help things along. There’s a large chance this tax removal will help workers, business owners, and consumers all around. Should more information become available, we will update you with the latest.

Make sure to check back for more cannabis, hemp, and psychedelic related news.