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San Francisco Suspends Cannabis Tax To Combat Illegal Market

December 6, 2021 05:09 pm ET

Back in 2018, San Francisco voters approved a 1%-5% cannabis business tax slated to go into effect in early 2022. After three hard years for the city’s cannabis industry, however, plans to implement the tax have gone out the window.

Early last week, San Francisco supervisors unanimously voted to suspend the cannabis tax through December 2022. “Now is not the time to impose a new tax on small businesses that are just getting established and trying to compete with illicit operators.” said Supervisor Rafael Mandelman, the bill’s author. Mandelman’s comment alludes to the fact that even without the new tax, cannabis businesses are struggling to keep up with illegal sellers who offer much lower prices.

Recent data from the California Legislative Analyst Office backs Mandelman’s claim. According to the office, cannabis tax rates and illegal cannabis sales go hand in hand. Simply put, the further that cannabis taxes go up, the more likely it is that consumers will turn to the illegal market. A large illegal market means less money for local government and lower quality products for consumers—not to mention the unsafe working conditions that illegal markets put their employees under.  

The tax suspension is expected to go into effect as soon as it is signed by Mayor London Breed. After that, Mandelman and his office are looking to work with other departments in the city to gather and analyze cannabis sales data. Using that data, Mandelman hopes to create a set of recommendations for tax rates and structures that can benefit legal retailers.

What do you think of San Francisco’s bold new move? Should the city go even further with its tax suspension? Let us know what you think in the comments!

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