Prop D opponents say tax spike for SF cannabis dispensaries leads to more illegal sales

SAN FRANCISCO (KTVU) - Now that cannabis is legal San Francisco, voters will be deciding just how much those businesses should be paying in taxes.

In a week and a half, San Francisco voters will be deciding on Prop D, whether or not to tax some of the city's largest cannabis businesses in the city, those bringing in more than $500,000 per year on top of the regular 8.75% sales tax.

President of The Board of Supervisors Malia Cohen authored the proposition, saying if approved it would be the lowest municipal tax on cannabis in the state, taxing businesses between one and five percent on their gross receipts. 

"They're still paying taxes in Alameda County, and they're still doing business in Alameda County. They're still paying taxes in LA County, and in other parts of the state of California. So, for what reason would San Francisco not tax this business?" asked Cohen.

But, the proposition is facing opposition, including some of the city's cannabis businesses. Their argument: High prices are already pushing some cannabis users to buy illegally on the black market.

More taxes mean higher prices still and more people buying illegally.

In a letter to the board of supervisors the green cross dispensary said "these small businesses are already struggling to combat the black market along with the vast costs of compliance. This tax would target these small businesses who are already fighting to keep their head above water by drowning them in extra costs."

Cohen says taxing cannabis is part of normalizing the business, something she says cannabis businesses have said they've wanted all along. 

"But it's a double edged sword. Cannabis businesses say they don't want to be taxed, but yet they want to be normalized," said Cohen. "This tax is actually a tool that will help us, help them become a normal commodity."

It's estimated the new tax if approved would bring in an extra 2 to 4 million dollars in the first year alone, money that could help pay for education around cannabis issues among other things.

Opponents say it amounts to a cash grab.