California's Cannabis Industry Faces 'Death Penalty' for Late Tax Payments

Santa Barbara County in California is considering a strict measure that could have severe consequences for cannabis farms. The county's Board of Supervisors has given initial approval to a law that would force the closure of any cannabis business if they are more than 30 days late in paying their taxes. This measure has raised concerns among some officials who liken it to a "death penalty" due to the absence of exceptions or leniency for non-payment. While the amendment passed unanimously in a first reading, it still requires a second vote later in the month to become law. Two board members expressed reservations about the harsh penalties imposed by the amendment.

Supervisor Steve Lavagnino initially opposed the measure, viewing it as an excessively severe approach to tax collection. However, he was convinced to vote in favor after clarifications were made regarding a 30-day grace period for tax payments. Under this provision, cannabis companies would have until the 30th day after the due date to pay their taxes. If the payment is made on the 31st day or later, their license would be revoked.

Santa Barbara County is home to a significant cannabis farming industry, rivaling Humboldt County in Northern California in terms of cannabis production. The issue of tax payments has become a major concern for the cannabis industry across the state. Many businesses in the cannabis supply chain are grappling with substantial debts, and numerous cannabis stores missed important tax deadlines for state taxes this year.

Santa Barbara County currently imposes a 4% tax on cannabis cultivators' business revenue, payable quarterly. The county has encountered difficulties in collecting taxes from these businesses. According to Brittany Odermann, deputy county executive officer, the existing county law allows pot farms to postpone their quarterly tax payments indefinitely, with some farmers paying their taxes nearly a year late. To address this issue, the proposed law would automatically revoke the business license of any cannabis company that is more than 30 days late on a quarterly tax bill. The measure offers no exceptions, even for businesses in good standing otherwise.

Supervisor Das Williams, although voting in favor of the measure, expressed concerns during the meeting that the severe penalties for late payments would likely lead to the closure of most companies. He argued that such strict standards are not followed in other industries and would risk many people losing their jobs.

The amendment is set to undergo a final vote next week, and if approved, it will take effect on August 10.