On Tuesday, Aug. 9, the county of Los Angeles Board of Supervisors approved a resolution placing the Cannabis Tax Measure on the Nov. 8, 2022 election ballot for approval by voters.

The measure’s passage would allow the county to tax cannabis businesses in the unincorporated areas of L.A. County. Revenues produced by this general tax will be directed to the county’s General Fund and through the budget process may be utilized on a broad array of programs and initiatives to further support economic and workforce development in the county, such as the Cannabis Equity Program through the Los Angeles County Office of Cannabis Management.

In February 2022, the Office of Cannabis Management, within the Department of Consumer and Business Affairs, was directed by the Board to start the development and implementation of an equitable commercial cannabis licensing program in the unincorporated areas of L.A. County.

The Office of Cannabis Management’s recommended regulatory framework includes building a robust Cannabis Equity Program. The program will provide access to resources such as initial priority licensing, business development and technical assistance, pro bono legal assistance, access to capital, and other potential pathways to jobs, entrepreneurship and ancillary economic opportunities within and outside of the cannabis industry. This program will help address the administrative barriers that create inequitable outcomes and calls for investments to bridge the gaps in educational, technical, and financial resources caused by systemic racism and exacerbated by the War on Drugs.

If the measure is approved by voters, cannabis businesses would be taxed at the following rates starting July 2023:

Retail: 4% of gross receipts

Manufacturing: 3% of gross receipts

Distribution: 3% of gross receipts

Testing: 1% of gross receipts

Cultivation: $7/sf of canopy (indoor artificial light)

$4/sf of canopy (mixed light)

$4/sf of canopy (outdoor)[1]

$2/sf of canopy space (nursery)

Any other type of Cannabis Business: 4% of gross receipts

These are some of the lowest rates in the state, and they are designed to better promote the viability of the legal cannabis businesses.

In addition, the Office of Cannabis Management recognizes the fast-changing nature of the cannabis regulatory and industry landscape and the need for county to adjust the tax rates to respond to a maturing, competitive and viable legal cannabis market in L.A. County. Accordingly, the proposed measure allows the Board to decrease or increase the tax rates up to the following maximum tax rates on cannabis businesses in the unincorporated areas of L.A. County after July 1, 2026:

Retail: 6% of gross receipts

Manufacturing: 4% of gross receipts

Distribution: 3% of gross receipts

Testing: 2% of gross receipts

Cultivation[2]: $10/sf of canopy (indoor artificial light)

$7/sf of canopy (mixed light)

$4/sf of canopy (outdoor)

$2/sf of canopy space (nursery)

Any other type of Cannabis Business: 4% of gross receipts

“The Office of Cannabis Management stands ready to fully implement a new program that will create a more responsible and sustainable cannabis market in Los Angeles County,” said DCBA Director Rafael Carbajal. “Building a fair and effective regulatory cannabis program requires a multifaceted approach and we are eager to hear the community’s voice through their vote as they help determine the potential scope of an equitable cannabis program in their communities.”

The Office of Cannabis Management is currently working with other agencies and stakeholders to launch their permitting program in 2023. For updates on this process, visit cannabis.lacounty.gov.

Until L.A. County fully develops and launches its cannabis licensing program, all commercial cannabis activities, including retail, delivery, manufacturing, and cultivation, remain prohibited in unincorporated L.A. County.

For more information about the Office of Cannabis Management, including updates on upcoming public and stakeholder engagement meetings and a list of retailers that participate in L.A. County’s Cannabis Compliance and Enforcement Program, visit cannabis.lacounty.gov.

L.A County will not be permitting outdoor cultivation during its initial launch of cannabis business permits per its December 2021 report. However, should the Board of Supervisors move to permit outdoor cultivation at a later time, the appropriate rates will apply.

Tax rates on cultivation will be annually indexed to inflation starting in 2026.

L.A. County Supervisor Kathryn Barger issued the following statement following the Board of Supervisors’ approval of a resolution that places a proposed ordinance for a general tax on cannabis businesses in the County’s unincorporated communities for approval by voters on the Nov. 8, 2022 election ballot:

“I want to clarify that today’s action does not mean that outdoor grows will be allowed. Our Board has taken a series of proactive steps to regulate cannabis businesses in unincorporated areas. The approach we’ve adopted will equitably distribute legal cannabis businesses in each supervisorial district and specifies that cannabis cultivation will only be permitted indoors, not outdoors in greenhouses.

Our Board must be clear: we will not tolerate illegal cannabis operations. Growers who operate illegally undermine our efforts to create a regulated and responsible cannabis industry, and often do so at the expense of the rural communities I represent. I’m firmly committed to upholding the law and will corral all available resources to enhance enforcement and abatement efforts.

In 2017, our Board of Supervisors made a commitment to regulate the cannabis industry in our County in a way that balances equity and responsibility. Today’s Board action is another step to fulfill that promise by giving voters a chance to weigh in on cannabis taxation policy.”

The County’s legal cannabis framework that will define where and how cannabis businesses can operate is expected to be drafted and made public in 2023.