San Diego Cannabis Tax Increase
San Diego Cannabis Tax Increase: What Dispensaries and Consumers Need to Know
San Diego is raising its cannabis sales tax in an effort to generate an additional $4 million in revenue to help close the city’s $258 million budget deficit. However, concerns are growing that higher taxes may drive cannabis consumers to shop elsewhere.
Cannabis Tax Increase Details
Starting May 1, 2025, the city will increase its cannabis sales tax from 8% to 10%, marking a 25% tax increase for local dispensaries. This change follows the City Council’s 8-1 vote on **March 10** to implement the tax hike.
San Diego’s municipal code allows council members to adjust this tax rate up to 15% of gross receipts. The tax originally started at 5% when voters approved the cannabis program in 2016, then rose to 8% on July 1, 2019.
Impact on Cannabis Businesses and Consumers
When combined with California’s existing cannabis taxes, the effective tax rate for San Diego dispensaries will increase significantly:
– Current Effective Tax Rate:30.75%
– New Rate (May 1, 2025):32.75%
– Projected Rate (July 1, 2025):36.75%
These increases account for:
– 7.75% state sales-and-use tax
– 15% state excise tax (scheduled to rise to 19% on July 1, 2025)
Cannabis Market in San Diego
Currently, the California Department of Cannabis Control** lists 28 active dispensary licenses in San Diego, which operates under a citywide cap of 36 dispensary permits.
How San Diego Compares to Other Cities
San Francisco’s cannabis tax structure is significantly lower:
– 2.5% for gross receipts between $1 million and $1.5 million
– 5% for gross receipts exceeding $1.5 million
San Diego’s Budget and Financial Outlook
San Diego’s budget for fiscal year 2025 is $5.82 billion, reflecting a 12.4% increase (or $643.2 million) over the previous year.
Key Takeaways
– Cannabis businesses in San Diego will face one of the highest tax rates in California starting in May 2025.
– Consumers may respond by seeking dispensaries in nearby cities with lower tax rates.
– Cannabis business owners should plan accordingly to manage the impact of these rising costs.
For cannabis retailers, understanding these tax changes is crucial to navigating the evolving regulatory landscape in San Diego.
Contact PM Insurance Services for more details on how to stay current with the ever-changing landscape of Cannabis Business Insurance.