San Diego County Cannabis Business Tax

Cannabis Business Taxes in San Diego County

When voters passed Proposition 215, the Compassionate Use Act of 1996, California became the first state to legalize the medicinal use of cannabis. Proposition 215 authorized Californians to obtain and use cannabis to treat any illness through the recommendation of a physician. Prior to the passage of Proposition 215, cannabis was illegal to sell, possess, grow, or use in any capacity in California. From 1996 to 2016, a variety of legislation was enacted within California to further establish the structure of the medicinal cannabis industry and reduce the criminal liability associated with the possession of cannabis.

In September of 2015, a package of bills called the Medical Marijuana Regulation and Safety Act (MMRSA) was passed, establishing a new regulatory framework for medicinal cannabis that included a licensing and oversight structure. The MMRSA was later renamed to the Medical Cannabis Regulation and Safety Act (MCRSA). The MCRSA entirely changed the manner in which medicinal cannabis was sold, permitting for-profit cannabis businesses to sell their crops after obtaining a license to do so from the state.

On November 8, 2016, the Control, Regulate, and Tax Adult Use of Marijuana Act (AUMA), Proposition 64, was passed by a healthy majority of voters. As a result, California became the sixth state to legalize adult-use (recreational) cannabis. Proposition 64 created a state regulatory, licensing, and taxation structure for adult-use cannabis, and permitted local governments to create their own regulatory, licensing, and taxation structure for cannabis in addition to those imposed by the State. It also permitted local governments to prohibit cannabis commercial activities, but not the growth, use, or transport of cannabis.

In response to the passage of Proposition 64, California legislators passed Senate Bill 94, which integrated MCRSA and AUMA into the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), and created a single regulatory system to govern both the medicinal and recreational cannabis industry. In January 2018, California began issuing licenses for recreational and medicinal cannabis activities under MAUCRSA.

As of July 2022, the cities of San Diego, Chula Vista, La Mesa, Oceanside, Vista, and Lemon Grove had adopted measures to both legalize cannabis business activities and impose a tax on cannabis businesses. Similar to the other twelve incorporated cities, the County of San Diego has not imposed a cannabis business tax for its unincorporated areas, or for the County at large. The cannabis business tax measures of the six incorporated cities that have passed them all differ in their structure. The following table outlines each City’s cannabis business tax structure:

Municipality	Tax Structure
Chula Vista	A tax of $25 per square foot of canopy on cannabis cultivators and 7% of gross receipts on all other cannabis businesses, Tax rates are identical for medicinal and recreational cannabis.
La Mesa	For both recreational and medicinal cannabis businesses, a tax of 1% of gross receipts for testing laboratories, 2% of gross receipts for distribution businesses, $7 per square foot of canopy on cannabis cultivators, and $1 per square foot of canopy space for nurseries. For medicinal cannabis businesses, no tax on retail sales, but a tax of 2.5% of gross receipts for manufacturing, processing, and microbusinesses. For recreational cannabis businesses, a tax of 4% of gross receipts for retail sales, and 2.5% of gross receipts for manufacturing, processing, and microbusinesses.
Lemon Grove	A tax of 5% of gross receipts for retail sales, 4% of gross receipts for cultivation, 2% of gross receipts for testing laboratories, 3% of gross receipts for distributors, and 4% of gross receipts for manufacturers and processors. Medicinal cannabis is excluded from the tax of gross receipts for retail sales.
Oceanside	A tax of 5% of gross receipts for retail sales, 1.5% of gross receipts for cultivation, 2% of gross receipts for distributors, 2% of gross receipts for nurseries, and 2.5% of gross receipts for manufacturers.
San Diego	A tax of 8% of gross receipts for retail sales, and 2% of gross receipts for cultivation, manufacturing, distribution, and storage businesses. Businesses can exclude gross receipts from medical cannabis sales.
Vista	A tax of 4% of gross receipts for manufacturers, 2% of gross receipts for distributors, 1% of gross receipts for testing laboratories, and 7% of gross receipts for retail. Tax rates are the same for medicinal and recreational cannabis businesses. Cultivation is currently not permitted, but it is legislated to be taxed at $14 per square foot of canopy area.