Berkeley may soon lower local recreational pot tax

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Berkeley City Council will vote on a proposal to lower taxes on recreational marijuana sales at its regular meeting Tuesday night, potentially easing the burden on the city’s newly licensed cannabis dispensaries.

The ordinance in question, put forth by Mayor Jesse Arreguín, proposes lowering the business license tax rate for recreational marijuana from 10 percent to 5 percent, but it will not alter the 2.5 percent tax on medical marijuana sales. Rationale for changing the rate stems, in part, from concern about Berkeley vendors’ competitiveness with sellers in neighboring cities.

According to District 4 City Councilmember Kate Harrison, Berkeley’s tax rate is “inconsistent” with those of Oakland and other Alameda County cities. Harrison added that she supports lowering the rate in order to maintain Berkeley’s competitive pricing and to make sure the cannabis industry is not “disfavored” compared to other industries.

“I think there is a general feeling among the council that it shouldn’t be 10 percent,” Harrison said.

Berkeley Patients Group, or BPG, is one of three licensed sellers of recreational marijuana in Berkeley. Sabrina Fendrick, BPG director of government affairs, characterized even the proposed 5 percent tax on recreational marijuana as “excessively high.”

Competition from other cities — as well as the black market —  has contributed to “sticker shock,” Fendrick noted, as potential customers complain about the pricing of cannabis products at legally licensed vendors.

“It seems fair for those of us that are doing it right to give us an opportunity in this new market,” Fendrick said. “If we were just to have a reasonably low tax rate, we would be able to compete … (and) hopefully help drive out these illegal competitors or get them to join the market.”

The current 10 percent rate originates from a 2010 ballot measure that was passed in Berkeley before the statewide legalization of marijuana in 2016. The original ballot measure also includes a provision allowing City Council to lower the tax rate, which was put forward on this week’s agenda.

At the Berkeley Cannabis Commission meeting Jan. 18, commissioners and local business owners met to discuss regulations for cannabis sales. The commission then sent a recommendation for lowering the tax rate to City Council.

Berkeley Cannabis Commission acting chair Charles Pappas agreed that taxes on the small businesses selling recreational marijuana should be reduced, but Pappas also stressed the need to look beyond the issue of taxation and provide licenses to other parts of the supply chain.

“The commission believes the City Council should also be dealing with cultivation, delivery, nurseries and private cooperatives, and also cottages and micro-businesses,” Pappas said.

District 7 City Councilmember Kriss Worthington said he has not seen enough research into how a tax reduction could affect consumer and business behavior. He expressed concern that the city’s budget could diminish given lower tax revenues. Though not opposed to lowering the rate, Worthington voiced desire for more information before voting on the ordinance.

“I am nervous about picking a seemingly random number and just cutting it in half,” said Worthington. “I think there needs to be more analysis.”

Sophia Brown-Heidenreich covers city government. Contact her at [email protected] and follow her on Twitter at @sophiabrownh.