Rich Eaton, owner of Cathedral City’s Vault Dispensary, argues that every resident and business has received or is entitled to some type of financial relief from COVID-19 – with the exception of the cannabis industry.
To help the industry cope with financial losses from the pandemic, Eaton recently proposed a six-month tax break from the city’s 10% tax on retail cannabis sales, which Cathedral City councilors discussed during a study session on Wednesday.
Council members largely disapproved of the proposal and chose not to move on to Eaton’s idea, citing concerns about whether the cannabis industry needed the tax break and how the tax break would affect the city’s finances.
Councilor Mark Carnevale asked the council to consider Eaton’s proposal during the August 21st city council meeting and expressed support for the proposal or a similar effort to support cannabis companies during Wednesday’s meeting.
Cannabis businesses became fully legal in California with the passing of Proposition 64, which went into effect in January 2018. For the first six months of 2021, the total taxes paid by the Cathedral City cannabis industry, including cultivation, manufacturing and distribution, were the highest ever. Retail was slightly more volatile than the industry as a whole, according to an employee report from the city, but retail paid higher taxes in June, July, August, October and December 2020 than in 2018 or 2019.
City manager Charlie McClendon estimated that a six-month tax break would cost the city $ 869,432 in lost tax revenue.
Eaton argued that the tax exemption would help post-pandemic cannabis companies and potentially increase sales taxes for the city by increasing cannabis sales. He referred to a “pilot” that Vault tried out in March 2020 when the pharmacy was paying taxes on behalf of customers and seeing a big surge in sales.
“All we ask is a tax break, like any citizen in Cathedral City, any business in Cathedral City, and any non-citizen in Cathedral City. We have been held back during this pandemic, we need help, ”Eaton said. a detective sergeant of a retired sheriff who worked for the San Diego County Sheriff’s Department.
Two other cannabis retailers also called to the meeting to support the proposal.
Palm Springs, Palm Desert, and Desert Hot Springs also impose a 10% tax on gross sales from cannabis retailers. Coachella levies a 6% tax. The other valley towns do not currently allow cannabis deals.
“Cathedral City could be on the front lines in lowering the repressive tax that the ancestors of legal cannabis agreed to legalize. They probably would have given up their first child to have this legalized, so yes, they voted the repressive to “taxes, but it’s been four years now and it’s very depressing and the time is perfect to change it,” said Eaton.
In May, the city approved the proposed budget for the next two fiscal years, with a deficit of $ 3.7 million in 2021-22 and $ 5.1 million in 2022-23.
Citing these figures, Councilor Rita Lamb and Mayor Pro Tem Ernesto Gutierrez expressed concern about the potential loss of revenue from a cannabis tax vacation.
“Our main job is to provide public services and public safety to our residents, so I am very reluctant to compromise, especially given that we are already running a budget deficit for the years to come,” said Lamb.
“Overall, the cannabis industry has done very well in the past five or six months. So if no council member is aiming to point out what services are you ready to cut in our city? What positions are you ready for? … I’m not for it, “said Gutierrez.
Carnevale said he was supportive of cannabis companies and said if there was more support from other council members he would have proposed a compromise.
“It is our duty to be business friendly, whether it is a marijuana-cannabis business, a restaurant or a shoe store – we have to help where we can. Now we are talking about the budget, and yes, we have this budget and that will be affected if this continues. But did we worry about the budget when we passed the obligation to show vaccinations to go to restaurants? Do you know how many thousands of dollars in taxes we lose as a result? “asked Carnival.
Carnevale said many residents are now moving to other cities to eat out after Cathedral City followed Palm Springs asking for proof of vaccination for indoor restaurants and bars.
Eaton also argued that the tax break would reduce illegal cannabis purchases, saying younger consumers don’t want to pay the additional taxes on legal cannabis. In response, Carnevale requested that Cathedral City Police Chief George Crum speak at a future meeting on the police agency’s efforts to reduce illegal cannabis sales in the city.
Since the proposal was discussed during a study session, the item was only submitted for council discussion. The Council did not have the opportunity to adopt the proposal during Wednesday’s meeting, but it could have instructed staff to submit a formal agenda item with the proposal for consideration by the Council at a future meeting. Instead, they did not instruct staff to move the proposal forward.
Erin Rode covers the cities of Palm Springs, Cathedral City and Desert Hot Springs in the western Coachella Valley. You can reach them at firstname.lastname@example.org.