County to implement ‘death penalty’ for late cannabis tax payment

Cannabis businesses that don’t pay their quarterly taxes or file the accompanying report within the 30-day grace period could lose their license to operate in Santa Barbara County starting in August. 

“It’s that severe,” Deputy County Executive Officer Brittany Odermann told the Board of Supervisors on June 27. “You are late. … You cannot renew.”

During that meeting, supervisors unanimously voted to strengthen the penalties on cannabis license holders as a way to address failures with timely payments and report filing. Odermann said that as the county’s cannabis code currently stands, businesses can pay taxes and file reports for all four quarters at the end of the year, pay the penalties, and renew their license. That will no longer be the case, starting with the first quarter of the next fiscal year. 

click to enlarge County to implement ‘death penalty’ for late cannabis tax payment
File photo by Jayson Mellom
TIGHTEN UP: On June 27, the Santa Barbara County Board of Supervisors passed stricter penalties on cannabis businesses that don’t pay their taxes on time.

The goal, 5th District Supervisor Steve Lavagnino said, is to get people to pay their taxes on time. During a June 6 cannabis update, county staff reported that 12 operators hadn’t submitted their third quarter tax report by April 30. Three operators filed between April 30 and June 6. At that meeting, supervisors asked staff to strengthen the penalties and consequences related to timely tax reporting and payment, which are due on the last days of January, April, July, and October. 

Initially, Lavagnino took issue with the proposal, saying that he thought it was too strict.

“This is not the way that we collect taxes in the county. I think we’ve gone from a kind of slap on the wrist to a death penalty,” he said. “That would be like if you’re one day late on your TOT [transient occupancy tax], you have to shut your hotel down, or if you’re one day late on your property taxes, you gotta move out of your house.” 

He added that forcing businesses out of the cannabis industry wasn’t the supervisors’ intent when they asked staff for stricter penalties. 

“Our intention is to get somebody to pay the tax,” he said. “I would hope that we could come up with something that is the intent of what we’re trying to do.” 

After a five-minute break to clarify the language of the proposed changes, staff came back, saying that there was already a 30-day grace period built into the cannabis tax system, which the new amendments wouldn’t alter. Odermann said that if taxes are due on Jan. 1, businesses have to pay them by the Jan. 30 delinquency date, which is also when the report accompanying those taxes needs to be filed. 

“We’re saying if you don’t do that by Jan. 30, then there’s the death penalty,” Odermann said. 

“That makes a lot more sense to me,” Lavagnino said in response.

No one spoke during public comment on the item, but 1st District Supervisor Das Williams wondered how any other person or business would do with the same requirements. He equated it to a quarterly fire drill. 

“This is a standard that, like, nobody else lives by,” he said. “Is there any other option? ... Can people essentially prepay their cannabis taxes to be out of this quarterly jeopardy? … If our goal is remedy and better collection, then why wouldn’t we allow people to pay their taxes ahead of time?” 

That, County Executive Officer Mona Miyasato said, is a question for the county tax collector. Before the vote, Williams requested that staff check in with the tax collector about the feasibility of early estimated tax payments, while Lavagnino asked that the county ensure an aggressive notification process so cannabis business owners weren’t caught unaware of the changes. The amendments will come back before the board for a second reading in July and are slated to go into effect in August.

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