SJCBC LLC (San Jose Cannabis Buyers Collective)

Today at the San Jose Rules Committee, the committee moved forward with the Marijuana Business Tax. It will now OFFICIALLY be on the Aug 3rd City Council Agenda.

At today’s meeting we presented a memorandum for public record highlighting the problems with the current suggested legislation.

Memo From Dave Hodges: Cannabis Tax Suggestions for SJ Council
- Cannabis Tax Suggestions for SJ Council – Just Changes

Some of the most concerning verbiage:

4.66.510 Rules and Regulations

For purposes of apportionment as may be required by law and for purposes of administration and enforcement of this Chapter generally, the Director, with the concurrence of the City Attorney, may from time to time promulgate administrative rules and regulations.

4.66.550 Deficiency Determinations

If the Director is not satisfied that any statement filed as required under the provisions of this Chapter is correct, or that the amount of tax is correctly computed, he or she may compute and determine the amount to be paid and make a deficiency determination upon the basis of the facts contained in the statement or upon the basis of any information in his or her possession or that may come into his or her possession. One or more deficiency determinations of the amount of tax due for a period or periods may be made. When a person discontinues engaging in a business, a deficiency determination may be made at any time within three (3) years thereafter as to any liability arising from engaging in such business whether or not a deficiency determination is issued prior to the date the tax would otherwise be due. Whenever a deficiency determination is made, a notice shall be given to the person concerned in the same manner as notices of assessment are given under Sections 4.66.560 through 4.66.580.

4.66.600 Violation Deemed Misdemeanor – Penalty

Any person violating any of the provisions of this Chapter or any regulation or rule passed in accordance herewith, or knowingly or intentionally misrepresenting to any officer or employee of the City any material fact in procuring the business tax certificate provided for in Chapter 4.76 shall be deemed guilty of a misdemeanor, and upon conviction thereof shall be punishable by a fine of not more than five hundred dollars ($500) or by imprisonment for a period of not more than six (6) months, or by both such fine and imprisonment.

DAVE’S RECOMMENDATIONS:

With regards to proposed Cannabis gross receipts tax.

We recommend the proposed tax rate on Medical Cannabis Retail businesses (dispensaries) be set at a maximum rate of 3%, and that a tax rate on Adult Use Cannabis businesses to be set separately at up to 5%. In addition, we recommend the following modifications to the current proposal:

1. MODIFY Section 4.66.250 “Amount of Businesses Tax Owed”
   • ADD the verbiage “up to”
   • CHANGE the verbiage “ten percent 10%” to “three percent (3%) of gross receipts”
2. MODIFY Section 4.66.300 “Payment – Penalty for Delinquency” ITEM “C”
   • ADD the verbiage “, or from the first operative date of this Chapter”
3. REMOVE COMPLETELY Section 4.66.510 Rules and Regulations
4. MODIFY Section 4.66.530 “Audit and Examination of Records and Equipment”
   • Remove the verbiage “and, where necessary, all equipment, of any person engaged in marijuana business in the City, for the purpose of ascertaining the amount of business tax, if any, required to be paid by the provisions hereof, and for the purpose of verifying any statements or any item thereof when filed by any person pursuant to the provisions of this Chapter.:”
5. REMOVE COMPLETELY Section 4.66.550 “Deficiency Determinations”
6. REMOVE COMPLETELY Section 4.66.600 “Violation Deemed Misdemeanor – Penalty”
7. MODIFY Section 4.66.630 “Effect of State and Federal Reference/Authorization”
   • REMOVE the verbiage “and federal” & “or federal”

Read the full legislation:

• Original City of SJ: San Jose Marijuana Tax for November Ballet

• with Dave’s Changes: San Jose Marijuana Tax for November Ballet