Recently MCCIA has been working closely with local cannabis cultivators and the Coastal Growers Association to come together as a unified group in an effort to address and combat several distinct challenges that face cannabis operators and the financial stability of the growers in our valley. Most prominent is the regulatory policy behind the annual Business Registration Form managed by the Monterey County Cannabis Program and Tax Assessor’s office and how that system plays into the annual cultivation taxes that are levied based upon cultivation square footage on each site.
For those that are not familiar with the process, the annual Business Registration Form policy requires all cannabis companies in Monterey County to submit an annual Business Registration Form to the County by the end of the fiscal year that reports the amount of square footage they intend to cultivate throughout the year. The amount of square footage reported on this form is the basis for the amount of taxes each operator is responsible for through the following fiscal year. Annual cannabis taxes are paid to the tax assessor’s office quarterly with the fiscal year beginning July 1. This policy requirement was promulgated prior to the creation of the Monterey County Cannabis Program and last March it was announced that the annual Business Registration Form could only be amended once per fiscal year regardless of whether operators wanted to increase their cultivation square footage (which would increase their tax bill) or reduce their square footage (thereby reducing the tax liability). Under this policy the County has 90 days to process the amendment request which allows them to make their determination, most likely, in the following quarter of the fiscal year.
For many reasons the industry would like the ability to amend the reporting of cultivation canopy disclosed in the Business Registration Form quarterly rather than only once per fiscal year. This is primarily due to the market demands, costs associated with regulatory requirements and each company’s bottom line when it comes to production costs.
As it currently stands the cannabis market is saturated. There are several factors that contribute to the oversaturation but at the end of the day it comes down to the ability of growers to sell their product and the price they can sell it for. As a result of the market being flooded with product, our local operators cannot sell what they have already produced and will be responsible for the tax consequence based upon the reporting in the Business Registration Form. However, if they don’t sell the plants they grew they will not have the ability to pay the tax. Moreover, operators are cutting back the size of their cultivation and production because they can’t sell the final product – yet they will still be responsible for the cultivation square footage reported annually whether or not they are growing in the space.
It is for these reasons the industry is asking for the ability to amend their Business Registration Form quarterly.This will allow them the flexibility to increase and decrease their crop size due to market demands and price of goods sold, which is similar to the way other agricultural companies operate.In addition, it will ensure their ability to pay the cultivation taxes required based upon the actual square footage they are cultivating in.
Jennifer Rosenthal is a local cannabis and criminal defense attorney. The views and opinions expressed in this article are those of the author and does not reflect an official position of the Association.