With just 70 days remaining until Jan. 1, when the state of California will legalize the sale and taxation of recreational marijuana, the city of Berkeley and state policymakers are still ironing out the details of cannabis regulation.
Proposition 64, which passed last election cycle, legalized marijuana use for nonmedical reasons in California. According to an article by Green State, a San Francisco Chronicle newsletter on cannabis in California, Berkeley is among the first cities prepared to sell recreational cannabis Jan. 1.
According to city spokesperson Matthai Chakko, the city is developing temporary licenses that would allow existing medical dispensaries to sell recreational cannabis until the city adopts comprehensive regulation. Policies on cultivating cannabis, however, remain murky.
“You can get a permit for a dispensary to distribute … but you can’t cultivate it,” said Councilmember Kriss Worthington. “We have a don’t ask, don’t tell policy on cultivation. It isn’t dropping out of the sky anywhere – obviously someone is cultivating it, but nobody is legally cultivating it.”
Currently, there are three dispensaries in Berkeley licensed to sell medicinal marijuana, according to Worthington. Three other dispensaries were approved for permits in 2016, none of which have been opened. Worthington added that he hopes all six will ultimately procure the state licenses necessary for them to expand to adult-use cannabis.
“The dispensaries have been well-regulated for a long time … so to grant them the ability to sell adult-use doesn’t really change the relationship between the city and the dispensaries,” said David Lampach, chairman of the Berkeley Cannabis Commission. “One thing that’s going to affect that is what the tax rate is going to be.”
City of Berkeley business license tax rates vary greatly among business types. The highest rate, $258 per $1000 of income, applies to peddlers and solicitors, while the lowest rate is reserved for grocers, retail or wholesale businesses, which are taxed a flat rate of $0.60 each per $1,000 of income. Cannabis business license tax rates, however, differ according to whether or not the dispensary is medicinal. Medicinal cannabis sellers are taxed at $25 per $1,000 of income, while non-medicinal “recreational” cannabis is taxed at $100 per $1,000 of income.
In terms of sales and tax revenue, adult-use markets, such as those in Colorado and Washington state, can generate as much as two to three times the revenue of medicinal marijuana, according to Sabrina Fendrick, director of government affairs for the Berkeley Patients Group.
“A conservative estimate would probably be hundreds of thousands of dollars a year,” Worthington said. “Some people have said millions of dollars a year.”
Berkeley does not currently have revenue projection figures for how much taxation of nonmedical cannabis businesses will bring in for the city.
“Adult-use sales is more than just adult-use sales. It’s the beginning of the end of marijuana prohibition,” Fendrick said.