Brief History of the Cannabis Business Tax Measure

On December 5, 2017, the Tracy City Council directed City staff to develop a regulatory ordinance to allow two non-store front (delivery only) medical cannabis businesses, and a tax ordinance for all cannabis business activities. Staff returned on March 20, 2018 with the proposed maximum tax rates for commercial cannabis activities allowed under Proposition 64: Medicinal and Adult Use Cannabis Regulation and Safety Act (“MAUCRSA”).

The City Council directed staff to return on May 1, 2018 with a resolution to place a Special Tax Measure on the November 6, 2018 ballot. The City Council further directed staff to commit the revenues generated from this Special Tax to be used to mitigate the police and code enforcement services associated with enforcement of Proposition 64. Staff prepared the necessary documents to place the Special Tax Measure on the General Municipal Election, however, the Special Tax Measure failed to receive the required 2/3 voter approval for a Special Tax.

Shortly thereafter, Council provided direction for staff to develop a regulatory permit to allow all commercial cannabis activity with the exclusion of outdoor cultivation. A series of meetings and draft ordinances have been provided for Council consideration. Staff anticipates receiving final approval of the permit application, which will allow commercial cannabis businesses to submit applications starting summer 2020. 

On April 21, 2020, the City Council directed staff to proceed with the documents required to place a general tax measure on the ballot for the General Municipal Election on November 3, 2020 to mitigate the potential impacts on the community related to the passage of Proposition 64. Unlike the 2018 special tax measure, the draft tax ordinance is a general tax measure and requires a 50% plus one vote for approval.

On May 19, 2020, the Tracy City Council voted 5-0 to place Measure W on the ballot to ask Tracy voters if the City should enact a tax on commercial cannabis and industrial hemp activities (“Cannabis Business Tax”). The maximum tax rates proposed by Measure W are:

• $12.00 annually per square foot for plant canopy for cultivators;
• 6% of gross receipts for retailers;
• 2.5% of gross receipts for testing laboratories;
• 3% of gross receipts for distribution businesses; and
• 4% of gross receipts for all other businesses.

If approved, the Measure would levy a tax on all cannabis and industrial hemp businesses (cultivating, transporting, dispensing, manufacturing, producing, processing, preparing, storing, testing, providing, selling, or distributing cannabis or industrial hemp, products containing cannabis or industrial hemp, cannabis accessories and any ancillary products) that operate within Tracy. The City of Tracy requires cannabis businesses operating in Tracy to comply with all state and local regulations including obtaining a City Cannabis Business Permit.