Goody bags. Discounted gummies. Complimentary munchies.
On the eve of a local dispensary’s 4/20 celebratory sale, Root One got a price reduction of its own tied to a city fee the cannabis retailer pays to operate in Guadalupe.
During a public hearing on April 14, Guadalupe officials discussed a request from Root One owner Austen Connella, who asked that the rate be temporarily reduced from 6 percent of store revenue to 2 percent.
“We would like temporary relief from a structure that’s hitting us harder than a normal city tax would,” Connella told the City Council. “The current 6 percent community benefit payment is a business obligation that comes out of our own revenue and is exposed to the harsh effects of 280E.”
IRS Code 280E is a federal policy that prohibits state-legal cannabis companies from deducting regular business expenses on federal taxes.
When Root One’s founder first approached Guadalupe about opening a dispensary in town, Connella—who also owns SLO Cal Roots—agreed to the 6 percent fee since the city didn’t have a cannabis tax to benefit from.
With hopes of changing the status quo by next year, Connella proposed that the City Council consider letting voters weigh in on the matter as part of this November’s general election.
“A formal cannabis tax is the better long-term solution,” Connella told the council. “It is transparent. It is standardized. It’s what most jurisdictions use.”
Connella clarified that the city would still get its 6 percent of gross sales as originally agreed, just via a formal 6 percent tax instead. He also pointed out that neighboring Grover Beach—home to one of his SLO Cal Roots locations—enforces a 5 percent tax on its dispensaries.
“A properly enacted cannabis tax would be materially different [from the current Guadalupe fee] because it could be structured as a customer tax collected at the point of sale, rather than a contractual payment borne directly by our business,” Connella said. “It’s put on the buyer.”
According to city staff, since Root One’s opening in the fall of 2024, Guadalupe has collected approximately $115,900 from the 6 percent city fee.
‘We never wanted this conversation to be about stepping back from Guadalupe. It was about finding a way to remain strong enough to keep contributing.’
—Austen Connella, Root One owner
Although city staff didn’t have a recommendation for the council about Connella’s proposed tax measure, they advised against granting the business owner’s request for temporary fee relief in the meantime.
“This request to lower city revenues is probably not timed as well as it could be,” said City Attorney Phil Sinco after reminding the council that Guadalupe has a $1.6 million budget deficit. “The city could use this revenue right now.”
If the city were to lower the 6 percent fee to 2 percent, it would lose out on approximately $77,200 in annual revenue, according to the staff report. A reduction to 4 percent would amount to a $38,600 loss. The City Council ultimately granted Root One the middle ground.
“We had asked for a larger reduction, but having the city contribution lowered from 6 percent to 4 percent for one year is still meaningful for us,” Connella told the Sun via email. “It gives us some much-needed breathing room and helps us continue building the business in a healthier way. For a small local operator like us, even a temporary adjustment can make a real difference.”
One part of staff’s reasoning for objecting to the 4 percent shift was that the 6 percent agreement “was an important contributor to the City Council’s selection of this entity,” Sinco explained to the council.
“Root One’s application offered a 6 percent fee whereas the other applicants that applied offered less,” he said. “To basically reduce that fee now, … the city’s not getting the benefit of its bargain. … Staff, of course, prefers to keep the money coming into the city.”
Councilmember Whitney Furness was the first person on the dais to voice support for granting Root One some relief.
“We’re in a budget deficit where we need to increase money coming into the city, but we will lose all cannabis funds if we don’t help,” Furness said. “I think it’s really important that we give some reprieve to a business that is special in this area.”
Mayor Ariston Julian agreed with Furness.
“If they go away, it’s going to hurt us even more,” he said.
The council approved the temporary 4 percent arrangement (for up to one year) with a 5-0 vote and directed staff to return with a formal tax ballot measure to review sometime before the end of May.
“We never wanted this conversation to be about stepping back from Guadalupe. It was about finding a way to remain strong enough to keep contributing,” Connella told the Sun over email. “The last couple of years have been tough for legal cannabis businesses across California. Costs are high, competition is intense, and margins are extremely tight. Root One has felt all of that.
“At the same time,” he continued, “we’ve worked hard to stay true to the commitments we made when we came to Guadalupe. We’re proud to be the city’s first and only locally owned and operated dispensary. … We want Root One to be here for the long haul. We’re thankful the council took a step that helps make that more possible.”
Connella noted that competition from dispensaries in Orcutt and Lompoc is slowing “our pace” when it comes to making Guadalupe’s sole dispensary profitable. The temporary fee reduction will allow Root One to lower its prices, making it more competitive.
If Guadalupe voters eventually were to pass a city sales tax measure, Root One could market its products lower than if it had to continue incorporating the city fee into its pricing.
In other words, the 6 percent toward the city would be up to the consumers to pay, rather than the business, as Councilmember Furness described it at the April 14 hearing.
“We really should work toward getting a tax on the ballot as soon as possible,” she said. “I don’t want to lose this little gem of a thing that we have going on.”
Reach Senior Staff Writer Caleb Wiseblood at cwiseblood@santamariasun.com.
This article appears in April 23 – April 30, 2026.