Growing Dollar Signs Instead of Marijuana Buds in Santa Barbara County

Growers, beware: Santa Barbara County now comes with stricter cannabis tax laws. Only 49 percent of the county’s legal cannabis operators were reporting or paying any quarterly taxes, and in response, the Board of Supervisors affirmed on Tuesday that operators are required to file the quarterly report on time and to make the tax payment within 60 days of the due date. The penalty for failing to do so is having their business license revoked or not renewed.

The county’s first cannabis ordinance, enacted in 2018, held the same penalty, but only if taxes were not paid at all. Those with zero revenue were not required to report. Scofflaws make up a small percentage of the operators, staff stated during the first hearing in June. Of the 69 operations in the county, nine failed to report and 26 reported zero gross receipts, or 51 percent.

Even with the change to the ordinance, the county is looking at as much as $10.2 million less in cannabis taxes for the fiscal year because of problems such as permitting and oversupply in the market causing tax revenues to drop, the county’s third-quarter cannabis report noted.

As was predicted at the outset of legalization, there is literally too much marijuana to go around. A huge oversupply exists in both the legal and illegal markets, which has affected cannabis sales and their associated taxes. Illegal growers are actively being pursued by the Sheriff’s Office, Brittany Odermann with the Cannabis Division reported, with deputies confiscating just more than 2,600 pounds of dried product worth $3.4 million in the third quarter of 2023 alone.

Other issues affecting the dwindling cannabis cornucopia is that of the six cannabis retailers the county picked to award licenses to, only two have officially opened — the other four remain in the permitting process. And in terms of growing cannabis, eight projects are currently on appeal and 56 licenses are pending in both the inland cannabis zone and the one in Carpinteria, though four growers withdrew their licenses earlier this year. If all the pending applications were approved, they would push the county over its acreage and permit limits.

The new rules go into effect for the reports or taxes due on or after August 17, 2023. Another hearing is set for August 22 to consider increasing cannabis fees to cover the program’s costs, which include membership in the California Cannabis Authority (CCA). The county currently pays $500,000 to access the CCA’s “track and trace” database, though a bill introduced by Assemblymember Gregg Hart would give California counties free access to the database. That bill passed the Assembly in May and is currently at the state Senate Appropriations Committee.