Santa Barbara County leaders are suspicious that cannabis operators are cheating the self-reporting system, and they want a more transparent, predictable tax structure. Tax revenues have fluctuated a lot year to year as the cannabis market boomed and crashed.

“The county really benefits from times when the market is high, but we’ve experienced some compliance challenges with this model and those do persist,” said Brittany Odermann of the County Executive Office.  

On Tuesday, the Board of Supervisors debated whether to change the tax structure, which is based on a business’ gross receipts.

Square footage is another method for taxing cultivators, which is based on the size of the operation rather than their self-reported sales and transfers, or they could tax product based on the weight.

Most other counties in California use the square-footage or gross-receipts models, and only one uses a weight-based tax model, Odermann said.

To get a tax change on the ballot, at least four supervisors have to support it. There were enough votes this week to at least consider it.

Supervisors voted 4-1 on Tuesday to have staff explore a square-footage tax system and a hybrid option using square footage and gross receipts.

Third District Supervisor Joan Hartmann suggested a hybrid system that uses a square-footage model as the “floor” so every cultivator would have to report and pay some taxes each quarter.

Fifth District Supervisor Steve Lavagnino said he couldn’t support the square-footage model and opposed the motion. He didn’t think it would be fair.

“Our system was sustainable through a great period in the industry and down period in the industry,” he said.

First District Supervisor Das Williams said he liked the square-footage model if the rate was reasonable, since it was verifiable.

“I continue to believe the most fair taxation methods usually are an elastic percentage, but that doesn’t work if people are selling to themselves at low values,” Williams said. “If they want to keep the current taxation level, they better start reporting numbers that bear some resemblance to reality.”

Several cannabis cultivators opposed a change during public comment.

“This would make an extreme impact on our business,” David van Wingerden of Farmlane in the Carpinteria Valley said, adding that the 4% cultivation tax works because it brings in more money when the market is good, and helps growers when yields and revenues are lower.

Lavagnino and Williams were on the ad hoc committee that developed the county’s original, “flawed” cannabis ordinance, as Odermann and others have called it. They have been criticized for the ordinance and for taking campaign donations from people in the industry while they worked on the committee.

“I’ve been doing this now for seven years, and I’ve taken a beating every time this comes up, and we’re just trying to get to a place that’s fair for everybody,” Lavagnino said Tuesday.

The decision to let unpermitted cultivators grow for years caused odor complaints and backlash against the entire industry — especially in the Carpinteria Valley, where many growers converted flower greenhouses to marijuana.

Anti-cannabis industry sentiment has propelled challengers for Williams’ District 1 seat and helped Carpinteria City Councilman Roy Lee win the seat in last week’s election.

Lee maintained his lead in the latest vote count released Wednesday, and Williams conceded the race. He will serve the rest of the term, and Lee will take office in January.