City of Desert Hot Springs planning tax cut on cannabis
DESERT HOT SPRINGS, Calif. (KESQ) - Desert Hot Springs, long known as a hub for cannabis in the Coachella Valley, is making a dramatic move to help struggling dispensaries - cutting the city’s cannabis tax from 10% to 5%.
The proposal for the tax cut came as local cannabis businesses face rising pressure from high taxes, the illicit market, and dispensaries on tribal land that don’t face the same tax requirements.
"They struggle as every business does, you know, up and down," Mayor Matas explained. "But for the most part, it stays strong. And, we have 5 or 6 that have been in business since day one, and they continue to be in business. And we want to make sure that we're there to support them."
At Tuesday's city council meeting, Council members had the first reading of the ordinance that outlines the proposed tax cut. The Council voted unanimously to pass the ordinance pending a second reading and final adoption of the ordinance on May 6.
Cannabis dispensaries as whole are experiencing a bit of an industry lull, multiple cities across the Coachella Valley have recently taken steps to support the industry.
"I mean, you you you always look at your region and you always look at the competitiveness between the cities. And most of the cities are lowering their rates right now," Mayor Matas said.
Mayor Matas says competition is fierce in the industry right now, with new dispensaries opening up shop across the Golden State, and it's the perfect time to take a hard look at things.
"You have a lot of dispensaries opening across the state of California," he explained. "You have the local tribes that are getting involved in it. So it's time for us to take a hard look. See, desert Hot Springs was really fortunate to pass a 1% sales tax in the last, election cycle. And so we were able to take in anywhere from would be an average, anywhere between 2 and 3 extra million dollars a year. So this is a perfect time for us to look at this in our budget cycle, and to be able to cut back if necessary."
Mayor Matas and Desert Hot Springs are looked upon as trailblazers in the cannabis industry. Desert Hot Springs was the first city to open up a legalized operation in the state of California, said Mayor Matas.
But business owners say they’re paying nearly 40% in combined taxes between the city, county and state.
“You have to remember, we have a sales tax that we pay to Riverside County, said Abrahim Robbin, co-owner of the Inland Valley Therapeutic Healing Center, IVTHC, in Desert Hot Springs. "It's 8.75%. Then you have an excise tax to the state of California, which is 15%. So when you add it all up, it's a pretty significant amount."
Robbin says taxes coupled with the inability to compete with dispensaries on tribal reservations and the success of the illicit market are taking a toll on their ability to thrive.
“The state promised a lot of enforcement," Robbin said. "If anything, all they've done is regulated our businesses that are legal and legitimate… and the people in the illicit markets have just been able to get slaps on the wrist. They close down shop. They reopen a couple of weeks later like nothing even happened.”
Mayor Matas doesn't anticipate any issue in the rate cut being adopted.
"I think the city council is very supportive and unanimous in the fact that we should reduce it to 5%," Mayor Matas explained. "I don't think there's going to be an issue passing this going forward."
