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November 6, 2018 — California General Election
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Local

City of Oakland
Measure V Initiative Statute - Majority Approval Required

To learn more about measures, follow the links for each tab in this section. For most screenreaders, you can hit Return or Enter to enter a tab and read the content within.

Election Results

Passed

122,628 votes yes (79.82%)

31,008 votes no (20.18%)

100% of precincts reporting (275/275).

Shall the Measure: (1) allowing cannabis businesses to pay business taxes quarterly; (2) allowing cannabis manufacturing and/or cultivation businesses to deduct the value of raw materials from gross receipts in calculating business taxes in the manner applicable to manufacturing businesses; and (3) authorizing the City Council, without returning to the voters, to amend medical or non-medical cannabis businesses taxes in any manner that does not increase the tax rate, be adopted?

What is this proposal?

Measure Details — Official information about this measure

Impartial analysis / Proposal

Barbara Parker, Oakland City Attorney

The City’s Business Tax

 

     The City of Oakland’s business tax laws are in an ordinance in Chapter 5.04 of the Oakland Municipal Code (“OMC”) (“Business Tax Ordinance” or “Ordinance”). The Business Tax Ordinance applies to all “persons” engaged in business activities in Oakland. The definition of “persons” includes but is not limited to any natural person, company, corporation, firm, estate, joint venture, club or association. (OMC section 5.04.030.)

 

     The Business Tax Ordinance provides the procedure to calculate the amount of business tax owed for various business activities based on a business’s “gross receipts.” “Gross receipts” means the total amount actually received or receivable by a business as a result of its business activities during a fiscal year.  The Ordinance specifically identifies the amounts that may be excluded from gross receipts in calculating the business tax.

 

     Current Business Tax Ordinance Does Not Allow Cannabis Businesses to Deduct the Value of Raw Materials from Gross Receipts

 

     OMC section 5.04.390 provides the methodology to calculate the annual tax for businesses that manufacture or process any goods, wares, merchandise, articles or commodities for sale in the City, and expressly allows deduction of the value of raw materials from gross receipts.

 

     Currently, the methodology for calculating the business tax for medical and non-medical cannabis businesses does not allow deduction of the value of raw materials from gross receipts. OMC section 5.04.480 of the Ordinance provides that each person engaged in a medical cannabis business shall pay a business tax of $50 for each $1,000 of gross receipts or fractional part thereof. OMC section 5.04.481 provides that each person engaged in a non-medical cannabis business shall pay a business tax of $100 for each $1,000 of gross receipts or fractional part thereof.  

 

     Proposed Amendments Would Allow Cannabis Businesses to Deduct the Value of Raw Materials from Gross Receipts, Pay Business Taxes on a Quarterly Basis, and Allow City Council to Amend the Cannabis Business Tax in Any Manner that Does Not Increase the Tax Rate

 

     This measure would amend the OMC to allow medical cannabis businesses and  non-medical cannabis businesses engaged  in manufacturing and/or cultivation activities  to (1) deduct the value of raw materials from gross receipts in the same manner that OMC section 5.04.390  provides for non -cannabis manufacturing businesses; and (2) elect to pay business taxes on a quarterly basis according to rules and procedures adopted by the Director of Finance.

 

     This measure also would allow the Oakland City Council, after holding a public hearing, to amend OMC section s5.04.480 and/or 5.04.481 in any manner that would not increase the tax rate applicable to medical and/or non- medical cannabis businesses, or otherwise constitute a tax increase that would require voter approval.

 

     This measure was placed on the ballot by the Oakland City Council. Passage of this measure requires the affirmative vote of a majority of voters (i.e., more than 50% of the votes cast).

 

Barbara J. Parker

City Attorney  

Financial effect

BRENDA D. ROBERTS City Auditor

Summary

 

     This Measure, if adopted by a majority (more than 50%) of voters, would amend the City of Oakland’s Business Tax Municipal Code, related to medical cannabis (Section 5.04.480) and non-medical cannabis (Section 5.04.481) businesses. The code amendments would:

     1) allow businesses engaged in cannabis manufacturing and/or cultivation to deduct the value of raw materials from gross receipts in the calculation of business tax (similar to manufacturing businesses, Section 5.04.390);

     2) allow cannabis businesses to remit business taxes on a quarterly basis; and

     3) authorize the City Council to amend the business tax on medical and non-medical cannabis in any manner that does not increase the tax rate, following a public hearing.

 

Oakland currently taxes all types of cannabis businesses and the rates are based on whether they operate in the medical or non-medical industries, at 5 percent and 10 percent, respectively, of gross receipts. The tax is applied to every activity in the industry's supply chain, including cultivation, manufacturing, delivery, testing, and retail sales.

 

The intent of this Measure is to provide the City flexibility to respond competitively to tax rates of neighboring jurisdictions. Cannabis businesses may consider tax rates a factor when deciding where to situate their businesses. City Council may adjust the tax rate for cannabis businesses, but may not increase the tax more than the current stated rates. It cannot be quantified or confirmed that adjusting tax rates would significantly impact tax revenue to the City of Oakland.

 

Financial Impact

If the Measure passes, the City would incur an estimated $30,000 capital improvement cost to update its taxpayer system.

 

This Measure enacts a general tax for unrestricted general revenue purposes and would go into effect ten (10) days after the vote is declared by Oakland City Council.

 

Disclaimer

The Office of the City Auditor has not audited and, as such, has not validated the City of Oakland Finance Department’s financial and statistical analysis that supports this measure. References to this data in our independent analysis represent the best data available at this time.  

Published Arguments — Arguments for and against the ballot measure

Arguments FOR

Measure V makes a few, much-needed technical fixes related to the administration of Oakland’s gross receipts tax on our medical and adult use cannabis businesses.

 

Current Oakland rules that require the payment of estimated business tax in a single annual lump payment can cause unnecessary security risks and operating problems for Oakland cannabis businesses. Because of the unusually high tax rates on gross receipts for cannabis businesses, many smaller cannabis businesses face considerable challenges in paying an entire year’s tax payment before receiving the very sales revenue that is being taxed.  Additionally, because of the industry’s limited access to traditional banking services, the current rules create unnecessary security risk by forcing these businesses to hold a lot more actual cash on hand than would otherwise be necessary. This measure provides a simple fix to these problems by allowing Oakland cannabis businesses to make business tax payments on a quarterly basis.

 

The additional clean-up provisions in the measure fix unintended oversights from earlier cannabis tax measures. Measure V clarifies that cannabis production businesses may take the same tax deductions for raw materials already taken by other Oakland manufacturing businesses. This measure also gives the City Council authority to modify, but not increase, the Adult Use cannabis tax rate in the future— authority it already possesses with respect to the Medical cannabis tax rate.  These common sense fixes will encourage businesses to locate their job-intensive manufacturing operations in Oakland and provide the City with flexibility to optimize tax policy as needed to remain competitive while the state’s regulated cannabis market continues to develop. Please join us in voting YES on Measure V.

 

s/Lanese Martin

Oakland Cannabis Regulatory Commissioner

s/Henry ‘Hank’ Levy

Alameda County Treasurer; CPA

s/Frank Lucido

Oakland Medical Doctor

s/Rebecca Kaplan

Oakland City Councilmember

s/Dan Kalb

Oakland City Councilmember

 

Arguments AGAINST

No Official Argument Con was submitted.

Who gave money?

To see who is funding ballot measures in Oakland, visit Open Disclosure Oakland.

More information

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