Compliance with the Medical Marijuana Regulation and Safety Act (MMRSA) continues to change the way local government manages marijuana use. As this law evolves, California’s cities and counties will need to consider the benefits and liabilities that the cannabis industry creates.

While marijuana dispensaries pose significant challenges to local municipalities, they also bring opportunities to increase general fund revenue. California’s cities and counties should weigh out the following issues when considering a marijuana tax, permitting cultivation and dispensing:

  • Revenue estimates generally do not account for low compliance levels
  • Competition from other cities and counties will eventually reduce projected tax revenues
  • The city is likely to experience increased costs for enforcement and administration
  • Storefront dispensaries are easier to administer than cultivators and brokers

Across the state, business taxes on dispensaries vary greatly. In the City of Sacramento, it’s 4%. In Palm Springs and San Jose it’s 10%. Depending on the number of dispensary permits issued and medicinal marijuana card holders in the area, a municipality can add more than $500,000 a year to its general fund.

MuniServices has helped several municipalities across California weigh their options for cannabis regulation and revenue models. When deciding, elected officials and administrators should weigh out current and proposed state policies to understand the real impacts medicinal marijuana will have on their communities.

The government relations team of MuniServices created a helpful policy report on medicinal marijuana in California to help local officials better understand some of the complexities surrounding this issue. You can find it on their website here.