Cannabis tax revenues are still coming in lower than expected, and dispensaries permitted by Santa Barbara County have been slow to open.
“The market is really affected by the oversupply of wholesale cannabis statewide, and that’s on the illegal and regulated side,” said Brittany Heaton, cannabis program manager for the County Executive Office.
“On the regulated market, many people got into the business quick, and it resulted in an oversupply of product, legal product and we also have, as I said, a thriving illegal market. So it’s an oversupply on both sides.”
Several cultivation operators dropped out of the county cannabis industry, and others are voluntarily fallowing for economic reasons rather than agricultural ones, Heaton said.
About half of the cultivation operators filed tax reports and paid revenues to the county, while a third reported zero gross receipts (and don’t owe tax revenues), and the rest didn’t file reports.
Operators only pay penalties on late reports if they owe money, not if they file late for reporting zero gross receipts, Heaton noted.
Last week, the county Board of Supervisors directed staff to develop a way to charge penalties for late reports.
The county collected $2 million in tax in the third quarter of the fiscal year and $4.2 million in the year so far, which ends June 30. That’s about $10 million less than budgeted, Heaton said.
First District Supervisor Das Williams said cannabis prices are “on their way back up,” so the county should keep an eye out for operators not reporting and operators underreporting gross receipts.
One way the county double-checks reports is through the state’s track and trace data platform.
Heaton said staff can compare operator reports, such as wet weight to dry weight of cannabis product, to make sure everything adds up.
Former supervisor and current Assemblymember Gregg Hart proposed a bill to allow county access to the data platform without paying the state $500,000 a year, Heaton said. If the bill doesn’t pass, the county is also working with the state to negotiate a lower data access fee.
Status of 6 County-Permitted Dispensaries
Dispensaries have opened throughout Santa Barbara County, but only six were permitted in unincorporated areas where the county will get the tax revenues.
Two of those six have opened – The Farmacy locations in Isla Vista and Santa Ynez – and four are still working to get business licenses.
At least one dispensary needs to build a new building, which could take a while, and others are getting building permits for tenant improvements to their spaces, according to county staff.
“It’s taking longer than anticipated so revenues are not as high as projected,” Heaton said.
Storefront cannabis dispensaries have the highest tax rate for the county’s cannabis industry, so having six operating shops will significantly increase revenues.
