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City of San Leandro <br />Meeting Date: February 18, 2020 <br />Staff Report <br />Agenda Section:File Number:20-051 ACTION ITEMS <br />Agenda Number:10.A. <br />TO:City Council <br />FROM:Jeff Kay <br />City Manager <br />BY:Jeff Kay <br />City Manager <br />FINANCE REVIEW:Liz Warmerdam <br />Interim Finance Director <br />TITLE:Staff Report for a City of San Leandro City Council Resolution to Modify the <br />Current Cannabis Business Tax Rate Schedule, Effective July 1, 2020 <br />SUMMARY AND RECOMMENDATIONS <br />Per the direction of the City Council at the November 12, 2020 City Council work session, City <br />staff presents the attached resolution that would modify the previously established cannabis <br />business tax rate that was adopted on June 17, 2019. That rate is currently set at 6% of gross <br />receipts, although it is scheduled to increase to 7% of gross receipts on July 1, 2020, and <br />subsequently increase to 8% of gross receipts two years thereafter. If the proposed resolution is <br />adopted, it would codify the following updated tax schedule, which would apply to any cannabis <br />business, irrespective of whether it is associated with medicinal or adult use cannabis business <br />activity in San Leandro, effective July 1, 2020: <br />·5% of gross receipts for retail cannabis businesses (i.e. dispensaries) <br />·3% of gross receipts for cannabis manufacturers <br />·2% of gross receipts for cannabis laboratories and distributors <br />BACKGROUND <br />In November 2016, Measure NN (the "Cannabis Business Tax") was approved by a majority of <br />San Leandro voters, enacting new cannabis business tax provisions as part of Chapter 2-21 of <br />the Municipal Code. The City Council subsequently certified these election results on December <br />19, 2016. The provisions of the measure allow the City to impose a gross receipts tax on all <br />businesses located within the City that use the cannabis plant as part of their business model, at <br />a maximum rate of 10% of annual gross receipts. Measure NN does not legalize or otherwise <br />permit cannabis businesses in San Leandro and the cannabis business tax is in addition to the <br />cost of an annual business license, as well as the annual $60,000 dispensary operating permit <br />fee that is imposed to recover the City’s costs in regulating cannabis dispensary businesses. <br />Page 1 City of San Leandro Printed on 2/12/2020 <br />83