Encinitas advances proposed cannabis business tax ordinance

ENCINITAS — The City Council on April 12 unanimously approved the first reading of a proposed cannabis business tax ordinance, setting up a tax increase on the city’s select cannabis businesses. 

In 2020, voters adopted a citizen’s initiative (Measure H) allowing the retail sale, distribution and manufacturing of recreational cannabis citywide. Nearly two years later, four cannabis businesses were selected for licensure in a lottery pool of more than 200 applicants: Siesta Life Encinitas LLC (1038 S. Coast Highway); SGI Encinitas AP LLC (1030 N. Coast Highway); Humanity Encinitas 4 Inc. (583 S. Coast Highway), and Ecrencinitas4 LLC (211 N. El Camino Real).

Last November, Encinitas voters approved the city-sponsored ballot measure known as the City of Encinitas Cannabis Business Tax Measure, or Measure L, with more than 65% of ballots cast supporting a tax increase on cannabis businesses operating in the city. 

The cannabis tax measure allows the city to adopt one or more ordinances to impose a cannabis business tax — for revenue purposes — upon cannabis and hemp businesses operating in the city.

Under Measure L, the city can increase taxes on retail cannabis businesses between 4% and 7%% and raise taxes on non-retail establishments by 1% to 4%. Cannabis cultivation sites would be taxed at fees ranging from $2-$10 per square foot canopy area.

City staff estimates the tax measure will generate between $800,000 and $1.4 million annually in gross revenue for Encinitas.

The City of San Diego currently has a tax rate of 8% on retail cannabis and 2% on non-retail. The cities of La Mesa, Lemon Grove, Oceanside and Vista set cannabis retail tax rates between 4% and 7% and non-retail uses at from 1% to 4%. In unincorporated areas, the County of San Diego taxes cannabis businesses at up to $7 per square foot for cultivation, 2.5% for manufacturing, 1% for testing and 2% for distribution and retail sales. 

The ordinance was unanimously adopted 5-0, with a second reading scheduled for April 26. If there are no modifications on approval, the law will be adopted.

Along with introducing the Cannabis Business Tax ordinance, the council finalized the city’s ban on smoking in public places, including in parked cars, at places of employment, and on sidewalks. Smoking has already been banned at beaches, parks, trails, and outdoor and patio dining areas.

The ban prohibits smoking in any area within 20 feet of a public place. The Sheriff’s Department will enforce the ban. Ninety days before the ordinance is officially adopted, city staff will conduct outreach programs to educate business owners and give time for modifications.