Sonoma County Considers Slashing Cannabis Cultivation Taxes Amid Market Woes

In a bid to provide financial relief to struggling cannabis growers, officials in California’s Sonoma County are weighing a proposal to significantly reduce marijuana cultivation taxes. The move comes amid dwindling revenues, plummeting prices, and a shrinking number of licensed cultivators in the region.

According to a recent recommendation from county staff, the Board of Supervisors is deliberating tax rate cuts of up to 39% for outdoor, greenhouse, and indoor cannabis cultivation. Specifically, the proposed reductions would lower outdoor grow taxes from $0.75 to $0.69 per square foot, mixed-light taxes from $3 to $2.51 per square foot, and indoor cultivation taxes from $12.50 to $7.58 per square foot.

The proposed overhaul also includes slashing the manufacturing tax rate from 3% to 1.5%, while increasing the retail cannabis tax from 2% to 3%. These adjustments aim to align Sonoma’s policies with market realities like oversupply issues, competition from large-scale producers, and diminishing program revenues projected to drop from $1.6 million this fiscal year to $1.4 million in 2024-2025.

“Reduced tax rates may be in store for struggling cannabis cultivators and manufacturers…driven in part by decreasing prices affecting the industry,” stated the Press Democrat, citing county documents.

This isn’t Sonoma’s first attempt at easing the tax burden on licensed growers. In 2022, supervisors approved a cultivation tax restructuring based on operation size rather than square footage, providing relief as wholesale marijuana prices plummeted.

Cannabis program coordinator McCall Miller cited “remaining responsive to market changes” as the impetus behind the latest proposed cuts, noting Sonoma’s dwindling number of active cultivators has dropped from 155 in May 2023 to just 75 currently.

As legal operators grapple with operating costs, taxes, and illicit market competition, officials hope realigning cultivator taxes with economic pressures can prevent further contraction and business closures in Sonoma’s regulated cannabis landscape.

The Board of Supervisors is expected to vote on the cannabis tax adjustments in the coming weeks as the county strives to sustain its marijuana program amid turbulent industry headwinds.