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6A.D. - Page 2 • Indoor cannabis nurseries with a cultivation use that produces only clones, immature plants, seeds and other products for commercial sales, and • Deliveries by cannabis retailers located outside of Redwood City. However, walk-in retail sales of cannabis remain prohibited in Redwood City. The City's current business license taxes in Chapter 32 Article V — Business Licenses of the Municipal Code apply to all businesses operating in Redwood City. Businesses not assigned a specific business license tax rate by Section 32.154 (special incremental tax rates) must pay a general license tax rate of $66 per business plus $43 per employee (code sections 32.152 and 32.153) for Fiscal Year (FY) 2018-19. In light of the types of cannabis businesses currently allowed in the City and that may be allowed in the future, staff recommends that the Council submit an ordinance to the voters that would impose a local business tax based on a percentage of gross receipts that varies by the business' commercial cannabis operation. The cannabis business tax is an excise tax imposed on commercial cannabis operations for the privilege of operating a cannabis business in the City. The proposed tax is not a sales tax and would not be imposed directly on cannabis users or consumers. ANALYSIS The proposed ordinance for voter approval authorizes the Council to set a tax rate up to 10% of gross receipts on each type of business in this emerging industry for the privilege of operating in Redwood City: The proposed initial rates for current City approved cannabis business activities: • 2.5% of gross receipts for Cannabis Nursery Businesses • 4.0% of gross receipts for Delivery -Only Cannabis Retail Sales; this applies to all cannabis retailers operating in the City whether there business is located in Redwood City or outside of Redwood City. The proposed ordinance also specifies initial tax rates for cannabis business activities that are not currently allowed in Redwood City. If any or all of these activities are allowed at a later date, the following tax rates would apply: • 1.0% of gross receipts for Testing • 2.0% of gross receipts for Distribution • 2.5% of gross receipts for Cultivation other than a Nursery • 4.0% of gross receipts for Retail Walk -In Sales • 2.5% of gross receipts for any other type of cannabis business.