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8.A. - Page 10 <br />owner/partner/full-time employee ($21 per part-time employee). This tax can be <br />applied without additional City Council action. <br />2. Cannabis Business Regulatory Fee <br />A cannabis business regulatory fee is contemplated as part of Phases III and IV. <br />This fee covers the actual costs of staff time for regulating cannabis businesses. <br />Adoption of a regulatory fee requires City Council approval and the completion of <br />a nexus study to determine the costs involved with regulating cannabis in <br />Redwood City. If the City Council approves moving forward to at least Phase III, <br />the fee would be developed to recover the reasonable regulatory costs <br />associated with issuing licenses and permits, performing investigations, <br />inspections, and audits, and enforcing the regulations. <br />3. Cannabis Tax (Excise Tax) <br />A cannabis tax is contemplated as part of Phase III and IV. The City can adopt a <br />cannabis tax which is a type of excise tax on all cannabis business. An excise tax <br />requires voter approval and a general excise tax would need 50% +1 of the vote <br />for adoption. Staff is recommending a cannabis tax that is a percent of a <br />business's gross receipts on medicinal and adult use cannabis. Many cities have <br />adopted a sliding scale percentage, which allows the City to phase in the taxes, <br />have some flexibility in light of an evolving market and set a tax rate that <br />encourages business compliance. <br />City staff is recommending a sliding scale tax in the range of 4%-7%. If the <br />Council approves moving forward with a cannabis tax, City staff would work with <br />MuniServices to identify the appropriate tax range for Redwood City, with a goal <br />to place a measure on the November 2018 ballot. <br />4. Sales Tax <br />The standard sales tax rate will apply to all customer purchases of adult use <br />cannabis. Medicinal cannabis is exempted from sales tax. Any purchases made <br />in Redwood City, either at a warehouse facility licensed for delivery or a <br />storefront retail location, would be subject to the standard 8.75% sales tax rate. <br />As with all sales tax transactions, the City receives 1 % and the County and State <br />would get the remaining 7.75% of the tax. In general, the City would not collect <br />sales tax on deliveries to Redwood City from locations outside the City, as the <br />sales tax typically goes to the jurisdiction where the licensed cannabis business <br />is physically located. <br />Each of the phases brings with it a different level of revenue potential based on the <br />taxes and fees in place. A conservative estimate of revenues for each phase is outlined <br />below. These estimates do not include cannabis business regulatory fees that may be <br />assessed for cost -recovery purposes. <br />1. Phase 1— Ordinance Adoption (No new revenue) <br />No additional revenue is expected from this phase. <br />10 <br />