Desert Hot Springs Votes To Lower Cannabis Cultivation Tax By 43%

10 years ago Desert Hot Springs was the first city within the state to legalize large scale cultivation, manufacturing, and distribution of cannabis, or marijuana.

Back in 2014, distributors were willing to pay almost any price to grow and sell their product legally, but now, things have changed.

When the industry in Desert Hot Springs was first legalized, owners were willing to pay $25 per square foot.

Once the recreational market also became legal just four years later, that price was no longer affordable for many.

“Taxes were too high, stacking rent, you know, when you put all those pieces together, it’s a pretty expensive operation to maintain.” Abraham Robin the owner of IVTHC says.

After years of cannabis businesses not succeeding in the ways the city thought they would, they agreed it was time for change.

The city dropped the cultivation tax from $25 per square foot to $10 per square foot.

Then just within this last year they made two temporary reductions, lowering rates to $5.10 for 6 months, and to $7.50 for another 6 months, but the industry says it was still being taxed too much.

“We have a 10% tax that goes to the city, we have a 7.75% sales tax, and then we have our 15% excise tax, which is, you know, brought on by the state. So you’re at 32.75% tax rate there. It’s going to take a lot of cities to get together and help us out and realize that most of us are small businesses, you know.” Robin says.

The city council voted unanimously Tuesday to lower the cultivation tax by 43% for those business owners, and this time permanently.

“From a staff perspective, we felt very competent in bringing that $5.75 figure to the city council. All of this was at the direction of the city council and the need to really keep this industry thriving in the City of Desert Hot Springs.” Doria Wilms, the Deputy City Manager for Desert Hot Springs says. 

On top of these businesses struggling to pay taxes, they’re doing their best to combat the illicit marijuana market as well. For this, the city says they have a plan.

“Our council has been very consistent in this, they want this legal market to be successful, and the way to do that is to combat the illicit market… and so we are out lobbying very, very robustly in the state, in Sacramento with our legislators to make sure that that’s taken seriously. This industry brought a tremendous amount of jobs to our community and has been part of our revitalization, and we need to make sure that this industry continues to be successful.” Wilms adds.