Santa Barbara County’s cannabis cultivation taxation system based on the self-reported dollar value of crops won’t be changed, at least in the near future, the Board of Supervisors decided last week.

However, the board on May 17 directed staff to work on ordinance amendments creating a “use it or lose it” policy for operators who have secured space within the county’s acreage cap but aren’t growing anything.

At the same time, supervisors want to provide growers within the cap a mechanism to temporarily fallow their land for good agricultural practices.

Supervisors also want to make it clear in the ordinance that transfers of product between an operator’s vertically integrated practices — such as seedlings from a nursery going to a cultivation operation — are considered taxable sales that are not undervalued.

Staff was directed to work on those issues and report back in six months.

The board wanted to provide incentives that would increase the number of cannabis processing operations through a special tax rate, but that was not pursued because it would require going to a public vote.

The decision, which came on a 3-2 vote, with 4th District Supervisor Bob Nelson and 1st District Supervisor Das Williams dissenting, did not address one of the board’s concerns — the potential for self-reporting to allow growers to provide inaccurate grow receipts.

Nelson favored assessing taxes on a per-pound basis rather than a percentage of gross receipts, but he noted he didn’t want to increase the tax but rather to provide a level field for all legal growers.

“I want something more simple but transparent,” Nelson said.

Williams favored creating a hybrid system that combined a minimum tax based on a cultivated area’s square footage with a tax based on pounds produced or a percent of gross receipts.

“We have to set up a system that rewards virtue and punishes vice,” Williams said. “We’re not there yet.”

Staff had offered the board three options, including converting the tax system from a percentage of receipts to a tax based on square footage of the cultivation area, and a hybrid system combining the percentage of receipts with a minimum tax.

The third option, recommended by the staff, involved maintaining the current system but amending the cannabis ordinances as directed by the board.

But the board majority backed away from changing the tax system because that would require a public vote, and the county was facing a short six-week deadline to get something on the November ballot.

Brittany Heaton, the county’s principal cannabis analyst, told the board an ordinance to change the system would have to be introduced by June 28, then reaffirmed by July 12, along with a request to place a measure on the ballot for the November election.

Supervisors also felt setting a per-pound tax rate would be difficult because there is no index for what cannabis is selling for at any given time, although Heaton said it might be possible to develop one, and they were concerned about tax changes the state is considering.

“The more you look at this, the harder it is to figure out something that works all the way around — for the county, the residents and the growers,” 5th District Supervisor Steve Lavagnino said.

Second District Supervisor Gregg Hart agreed that changing the system without knowing what the impact potential shifts in the state tax system could have locally, the county might have to make even more changes in the future.

“It’s hard to hit the right public bull’s-eye when things are changing so radically all the time,” Hart said, recommending the board “hit the pause button” until after the state’s changes.


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