City of Palm Desert recommends lowering taxes on cannabis businesses

Another valley city is considering cutting taxes for cannabis businesses as local small businesses warn that the industry is collapsing under hefty taxation.

Palm Desert city staff is recommending the city council to cut its retail and delivery fees from 10 percent to 5 percent. This comes after a study by the city found that cannabis sales there have declined by as much as 25 percent.

Jocelyn Kane, Vice President of the Coachella Valley Cannabis Alliance Network, said "there really needs to be some help from the cities if this industry is important to them."

Palm Desert originally adopted a tax rate of 10 percent on the retail cannabis industry, which was in line with Palm Springs, Cathedral City, and Desert Hot Springs. However, cities such as Coachella, Indio, and unincorporated county areas have lower tax rates.

Recently, the Cathedral City council voiced unanimous support for cutting its tax rate in half to 5 percent, with Mayor Pro Tem Mark Carnevale calling the previous 10 percent rate "greedy."

Palm Desert's proposal is estimated to decrease the city's revenue by $500,000 but will align Palm Desert with other valley cities and help the city retain and attract cannabis businesses.

Palm Desert Mayor Jan Harnik said the city's cannabis tax rate needed to be looked at, because it was initially was put in place because of public safety concerns but those concerns have not materialized.

"If these businesses can't survive, then there's no taxes to talk about. So let's keep this business here and thriving," Kane said.

The Palm Desert City Council will vote on the proposed changes on Thursday, February 16th. If the resolution is approved, the new tax rates will come into effect on March 1, 2023.