Hollister envisions a cannabis tax boom

Cannabis firms could pay $500,000 in new taxes

Not many industries are eager to be taxed, but the burgeoning cannabis industry in Hollister is willing to pay in order to operate in a market now friendly to recreational, adult-use businesses.

“Taxes are a concern in the industry, and if you add state and local taxes together, they’re being taxed at 30 to 40 percent,” said Victor Gomez, president of political consulting firm Pinnacle Strategy. “The industry understands that they can pay these high taxes if they can operate legally. They want to be regulated.”

Gomez, former mayor and member of the Hollister City Council, helps his clients in the cannabis industry navigate the turbulent waters of city government.

“I expect [cannabis business] taxes to go up by 500 percent,” Gomez said. “I have clients tell me now that they pay up to $100,000 a year in taxes as a medical cannabis manufactory at a 5 percent tax on gross receipts. They tell me that if they are allowed to operate as a recreational facility that there is no reason that they wouldn’t pay the city up to $400,000 to $500,000 a year in taxes. That can make a significant impact that can pay up to three additional police officers, code enforcement, and planning workers as well as the cannabis coordinator. It’s a lot of jobs.”

The City of Hollister has approved permits for two medical dispensaries, Purple Cross Rx and Monterey Bay Alternative Medicine, along with a handful of cannabis manufacturing, distributing, and cultivation businesses such as Euphoric Life Inc., High Class Distribution, Hollister Holistics, Traditional Roots, Pacific Organics and Wellness, and Agripharma Extraction and Nursery. To Gomez, Hollister’s tax structure is a good reason for more cannabis business to come to Hollister.

The city also approved a cannabis testing lab, High Sierra Analytics, during the city council meeting on Monday. Starting on July 1, cannabis will be required to go through laboratory inspection before products may be sold. Demand should be high since the closest testing laboratory in the region is located in Santa Cruz. On Monday, the vote to approve the laboratory was unanimous.

“The taxes in Hollister are fairly reasonable,” Gomez said. “They’re being taxed at around 15 percent in Monterey County and in places in Southern California they’re paying up to 20 percent. Hollister is welcoming to the business community, and in this case, they are welcoming the cannabis industry.”

Gomez first became acquainted with the cannabis industry when he worked in city government in San Jose. From there and in his career in local city politics, Gomez became a supporter of the industry.

“I support the industry because I think it’s a good way to make illegal businesses legit businesses,” Gomez said. “For me, it’s important to have business thrive, and it allows other businesses an opportunity to thrive because of it. Businesses that support the cannabis industry, such as agricultural supply businesses and insurance companies, thrive as well.”

Support for recreational marijuana, as seen in the passage of Proposition 64, is strong in Hollister as it is in the rest of the state, where it passed by over 57 percent of the vote.

“Over 60 percent of Hollister voters voted for Proposition 64,” Gomez said. “I’m not a personal user myself, but I think it’s about the business injection.”

Concerns over security and a potential increase in crime to Gomez are unfounded. Now that the illegality of cannabis has been removed, the “cool” factor has declined.

“It’s kind of like Cuban cigars,” Gomez said. “As soon as they were legal, it wasn’t exciting anymore. I think it’s kind of like what we experienced back in the 20’s and 30’s with alcohol. I think you have a higher chance of getting shot at a pharmacy, than a cannabis dispensary. You have people robbing pharmacies for oxycodone. From a security perspective, there is no proof that there is a security problem.”

The approval process to obtain permits to operate cannabis businesses can be onerous in Hollister, but it is part of Gomez’s job to help his clients navigate through the process. To him, there is a good reason why it can be a difficult process.

“In general the approval process can be cumbersome compared to the state,” Gomez said. “It’s not easy for anyone to get. That’s the point. They want to make sure everyone is well vetted.”

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