King City Municipal Code Ch. 5.14 Commercial Cannabis Tax

This chapter is entitled the “Commercial Cannabis Tax” and is enacted solely to raise revenue for the general governmental purposes for the city and not for purposes of regulation or of raising revenues for regulatory purposes. All of the proceeds from the tax imposed by this chapter shall be placed in the city’s general fund and used for the purposes consistent with the general fund expenditures of the city. The cannabis tax is a tax on a cannabis business (and not a sales tax) and shall not be separately identified by the cannabis business on the customer, member, patient or caretaker or otherwise specifically assessed or charged to any member, customer, patient or caretaker.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

There is established and imposed, a commercial cannabis tax at the rate set forth in this chapter.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

The definitions set forth in this part shall govern the application and interpretation of this chapter.

“Business”

includes all activities engaged in or caused to be engaged in within the city, including any commercial or industrial enterprise, trade, profession, occupation, vocation, calling, or livelihood, whether or not carried on for gain or profit, but shall not include the services rendered by an employee to his or her employer.

“Calendar year”

means January 1 through December 31, of the same year.

“Cannabis”

means all parts of the plant Cannabis sativa Linnaeus, Cannabis indica, or Cannabis ruderalis, whether growing or not; the seeds thereof; the resin, whether crude or purified, extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds or resin. “cannabis” shall not include “industrial hemp” unless otherwise specified.

“Cannabis business” or “ marijuana business”

means any commercial business activity not limited to, cultivation, testing, transporting, manufacturing, compounding, converting, processing, preparing, storing, packaging, distribution, wholesale, and/or retail sales of cannabis, cannabis products, industrial hemp and/or industrial hemp products and any ancillary products in the city, whether or not carried on for gain or profit.

“Cannabis product”

means raw cannabis that has undergone a process whereby the raw agricultural product has been transformed into a concentrate, an edible product, or a topical product. “Cannabis product” also means cannabis products as defined by Section 11018.1 of the California Health and Safety Code and is not limited to medicinal cannabis products.

“Canopy”

means all areas occupied by any portion of a cannabis plant, inclusive of all vertical planes, whether contiguous on any one site. When plants occupy multiple horizontal planes (as when plants are placed on shelving above other plants) each plane shall be counted as a separate canopy area. The plant canopy does not need to be continuous on any premises in determining the total square footage which will be subject to tax.

“Commercial cannabis tax,” “business tax” or “cannabis tax”

means the tax due for any person engaged in business in the city related to cannabis, cannabis products, industrial hemp and/or industrial hemp products, including a cannabis business, required by this chapter.

”Commercial cannabis cultivation”

means cultivation of cannabis undertaken in the course of conducting a cannabis business.

“Distributor” or “distribution” or “distribution facility”

shall mean a person or facility licensed by the state to engage in the business of purchasing cannabis from a licensed cultivator, or cannabis products from a licensed manufacturer, for sale to a licensed retailer (dispensary).

“Employee”

means each and every person engaged in the operation or conduct of any business, whether as owner, member of the owner’s family, partner, associate, agent, manager or solicitor, and each and every other person employed or working in such business for a wage, salary, commission, barter or any other form of compensation.

“Engaged in business” or “engaged in the business” or “engaged in a business”

means the commencing, conducting, operating, managing or carrying on of a cannabis business and the exercise of corporate or franchise powers or other powers, whether done as owner, or by means of an officer, agent, manager, employee, or otherwise, whether operating from a fixed location in the city or coming into the city from an outside location to engage in such activities. A person shall be deemed engaged in business within the city if:

(A)

Such person or person’s employee maintains a fixed place of business within the city for the benefit or partial benefit of such person;

(B)

Such person or person’s employee owns or leases real property within the city for business purposes;

(C)

Such person or person’s employee regularly maintains a stock of tangible personal property in the city for sale in the ordinary course of business;

(D)

Such person or person’s employee regularly conducts solicitation of business within the city;

(E)

Such person or person’s employee performs work, sells products or renders services in the city; or

(F)

Such person or person’s employee utilizes the streets within the city in connection with the operation of motor vehicles for business purposes.

“Evidence of doing business”

means whenever any person shall, by use of signs, circulars, cards or any other advertising media, including the use of internet or telephone solicitation, or represents to a government agency or to the public that such person is engaged in the business of a cannabis business in the city, then these facts may be used as evidence that such person is engaged in business in the city.

“Gross receipts”

except as otherwise specifically provided, means whether designated as a sales price, royalty, rent, membership fee, ATM service fee, delivery fee, slotting fee, any other fee, vaping room service charge, commission, dividend, or other designation, the total amount (including all receipts, cash, credits, services and property of any kind or nature) received or payable for sales of goods, wares or merchandise, or for the performance of any act or service of any nature for which a charge is made or credit allowed (whether such service, act or employment is done as part of or in connection with the sale of goods, wares, merchandise or not), without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, interest paid or payable, losses or any other expense whatsoever. However, the following shall be excluded from gross receipts:

(A)

Cash discounts allowed and taken on sales;

(B)

Any tax required by law to be included in or added to the purchase price and collected from the consumer or purchaser;

(C)

Such part of the sale price of any property returned by purchasers to the seller as refunded by the seller by way of cash or credit allowances or return of refundable deposits previously included in gross receipts;

(D)

Cash value of sales, trades or transactions between departments or units of the same business located in the city of King authorized by the tax administrator in writing or in accordance with Section 5.14.210;

(E)

Whenever there are included within the gross receipts amounts which reflect sales for which credit is extended and such amount proved uncollectible in a subsequent year, those amounts may be excluded from the gross receipts in the year they prove to be uncollectible; provided, however, if the whole or portion of such amounts excluded as uncollectible are subsequently collected they shall be included in the amount of gross receipts for the period when they are recovered;

(F)

Receipts of refundable deposits, except that such deposits when forfeited and taken into income of the business shall not be excluded;

(G)

Amounts collected for others where the business is acting as an agent or trustee and to the extent that such amounts are paid to those for whom collected. These agents or trustees must provide the finance department with the names and the addresses of the others and the amounts paid to them. This exclusion shall not apply to any fees, percentages, or other payments retained by the agent or trustees;

(H)

Retail sales of items that are not cannabis, industrial hemp, cannabis products or industrial hemp products, such as t-shirts, sweaters, hats, stickers, key chains, bags, books, posters, rolling papers, cannabis accessories such as pipes, pipe screens, vape pen batteries (without cannabis or industrial hemp) or other personal tangible property which the tax administrator has excluded in writing by issuing an administrative ruling per Section 5.14.210 shall not be subject to the cannabis business tax under this section. However, any business activities not subject to this section as a result of an administrative ruling shall be subject to the appropriate business tax provisions of Title 5, Chapter 5.12 or any other title or chapter of this code as determined by the tax administrator;

(I)

Payments made by the tax-reporting cannabis business (seller) to a cannabis business (buyer) for the difference in the original acquisition price and subsequent renegotiated or finalized selling price of products or services sold to a specific end customer. This type of transaction is referred to as a “billback.” The tax-reporting cannabis business must provide supporting documentation acceptable to the tax administrator to substantiate the transaction in order to be eligible for an exemption;

(J)

Any business which sells industrial hemp and/or industrial hemp products or offers services or activities related to industrial hemp and/or industrial hemp products and/or which is not required to obtain a cannabis or industrial hemp permit or license from the city or the state for the purpose of cultivating, growing, drying, curing, manufacturing, processing, packaging, transporting, distributing, testing or selling of industrial hemp either wholesale or retail shall be exempt from the cannabis tax provided that such business does not generate more than fifty percent of their total gross revenues in the reporting period from the business from industrial hemp activities. However, the exemption may be amended by the city council by resolution or ordinance pursuant to Section 5.14.070(i) to increase or decrease the percentage of business from zero to one hundred percent and shall not be considered a new, increased or extended tax under Section 5.14.340 requiring a vote. To the extent the gross revenues from the hemp activities do not meet the relevant percentage to be included, this exclusion shall reduce the gross receipts to zero. The business shall still be subject to appropriate business tax provisions of other chapters of this code and/or appropriate provisions of this chapter;

(K)

Any distributor located in the city that distributes cannabis and/or cannabis products for another cannabis business located in the city which is licensed or permitted by the city shall not be required to include such gross receipts for the purpose of paying the cannabis business tax on such gross receipts, the revenues from distribution to the other cannabis business. However, such deduction must be properly documented on the city’s tax remittance form in order to claim such deduction in a manner acceptable to the tax administrator. This limitation may be amended or eliminated by the city council by resolution or ordinance pursuant to Section 5.14.070(i) and will not be considered a new, extended or increased tax requiring voter approval under Section 5.14.340.

“Industrial hemp”

means a crop that is limited to types of the plant Cannabis sativa L. having no more than three-tenths of one percent tetrahydrocannabinol (THC) contained in the dried flowering tops, whether growing or not; the seeds of the plant; the resin extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds or resin produced therefrom. “Industrial hemp” also means an agricultural product, whether growing or not, that is limited to types of the plant Cannabis sativa L. and any part of that plant, including the seeds of the plant and all derivatives, extracts, the resin extracted from any part of the plant, cannabinoids, isomers, acids, salts, and salts of isomers, with a delta-9 tetrahydrocannabinol concentration of no more than 0.3 percent on a dry weight basis.

“Industrial hemp products”

also means any raw hemp and/or industrial hemp that has undergone a process whereby the raw agricultural product has been transformed into a concentrate, an edible product, or a topical product or any other product containing industrial hemp. “Hemp product” also means industrial hemp or products therefrom as may be defined or described in Food and Agriculture Code 81000 et seq., and/or other applicable law.

“Manufacturer” or “manufacturing”

means a person that conducts the production, preparation, propagation, or compounding of manufactured cannabis or cannabis products either directly or indirectly or by extraction methods, or independently by means of chemical synthesis at a fixed location that packages or repackages cannabis, or cannabis products or labels or relabels its container, that holds a valid state license and that holds a valid local license or permit.

“Medicinal cannabis” or “medicinal cannabis product”

means cannabis or a cannabis product, intended to be sold or sold for use pursuant to the Compassionate Use Act of 1996 (Proposition 215), found at Section 11362.5 of the Health and Safety Code, for a medicinal cannabis patient in California who possesses a physician’s recommendation, or a cannabis card issued pursuant to Health and Safety Code Section 11362.71.

“Nursery”

means a facility or part of a facility that is used only for producing clones, immature plants, seeds, and other agricultural products used specifically for the planting, propagation, and cultivation of cannabis.

“Person”

means, without limitation, any natural individual, organization, firm, trust, common law trust, estate, partnership of any kind, association, syndicate, club, joint stock company, joint venture, limited liability company, corporation (including foreign, domestic, and nonprofit), cooperative, receiver, trustee, guardian, or other representative appointed by order of any court. A person may be operated as a for profit or not for profit organization or entity or person or as otherwise permitted under the law.

“Retailer”

means a person, entity, business or party who sells cannabis, cannabis products, industrial hemp and/or industrial hemp products. The term “retailer” does not include the wholesale sale of cannabis, cannabis products, industrial hemp, and/or industrial hemp products, including as a distributor. A retailer may for example engage in sale of such products by delivery and/or by storefront, as a dispensary, or as another type of store, place, or as part of a service business or otherwise.

“Sale,” “sell,” “sells” and “to sell”

means and includes any sale, exchange, or barter. It shall also mean any transaction whereby, for any consideration, title to cannabis, cannabis products, industrial hemp and/or industrial hemp products are transferred from one person to another and includes the delivery of cannabis, cannabis products, industrial hemp and/or industrial hemp products pursuant to an order placed for the purchase of the same.

“Square foot” or “square footage”

means the maximum canopy area allowed under permit classification by the local agency and/or licensed by the state and shall be the basis for the tax rate calculations for cultivation unless otherwise specified.

“Tax administrator” or “administrator”

means the finance director or such other designated by the city manager to administer this chapter.

“Testing” or “testing laboratory”

means a facility, entity, or site in the state and within city limits, that offers or performs tests of cannabis or products and is an accredited body by the state and is independent from all other persons involved in the cannabis industry.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

Nothing contained in this chapter is deemed to repeal, amend, be in lieu of, replace or in any way affect any requirements for any license, land use entitlement or permit required by, under or by virtue of any provision of any other title or chapter of this code or any other ordinance or resolution of the city, nor be deemed to repeal, amend, be in lieu of, replace or in any way affect any tax, fee or other charge imposed, assessed or required by, under or by virtue of any other title or chapter of this code or any other ordinance or resolution of the city. Any references made or contained in any other title or chapter of this code to any licenses, license taxes, fees or charges, or to any schedule of license fees, is deemed to refer to the licenses, license taxes, fees or charges, or schedule of license fees, provided for in other titles or chapters of this code.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

(a) The payment of a cannabis tax required by this chapter, and its acceptance by the city, shall not entitle any person to carry on any cannabis business unless the person has complied with all of the requirements of this code and all other applicable laws, nor to carry on any cannabis business in any building or on any premises in the event that such building or premises are situated in a zone or locality in which the conduct of such cannabis business is in violation of any law.

(b) No cannabis tax paid under the provisions of this chapter shall be construed as authorizing the conduct or continuance of any illegal or unlawful business, or any business in violation of any ordinance of the city.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

The cannabis tax imposed under this chapter shall be paid to the tax administrator in the King City finance department on or before the prescribed date during regular city business hours.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

(a) Every person who is engaged in the business of commercial cannabis cultivation in the city other than as a nursery shall pay an annual cannabis tax on cannabis. The initial tax shall be set at a rate of twenty-five dollars per square foot of permitted or licensed canopy space for the first five thousand square feet and then ten dollars per square foot of canopy space for the remaining space licensed or permitted canopy space by the city or state of California for cultivation of cannabis.

(b) Every person who is engaged in the business of commercial cannabis cultivation as a nursery in the city shall pay an annual cannabis tax on cannabis. The initial tax shall be set at five dollars per square foot for the first five thousand feet of canopy space and two dollars and fifty cents for the remaining canopy space for the first three years.

(c) For purposes of subsections (a) and (b), the square feet of canopy space for a business shall be based on the maximum square footage of canopy allowed by the city permit issued to the business for commercial cannabis cultivation, or, in the absence of such permit, the square footage shall be the maximum square footage of canopy for commercial cannabis cultivation allowed by the state license. All canopy square footage that is authorized by the city permit shall be included in the calculation of the cannabis tax for cultivation. No deduction will be applied to any canopy square footage that is not used for cultivation unless: (1) the tax administrator is informed in writing that such space cannot be used for a period of at least three months due to extreme or unusual events reasonably out of control of the person and/or cannabis business (e.g. fire, earthquakes, extended utility breakdowns caused by the utility, major pipe leakages) and not due to the negligence of such party; and (2) the tax administrator reviews the information submitted and any additional evidence requested and makes a determination in his or her sole discretion that such type of extreme or unusual event exists that warrants a reduction. In making the determination, the tax administrator may look to the concepts of force majeure, impossibility of performance of contracts and frustration of purpose. Any decision of the tax administrator under this subsection (c) with respect to extreme and unusual events to warrant a reduction in square footage may be appealed to the city council.

(d) Every person who is engaged in the business of manufacturing or of testing of cannabis or cannabis products in the city shall pay an annual cannabis tax on cannabis and/or cannabis products. The initial annual tax shall be set at a flat rate of thirty thousand dollars per facility for the first three years.

(e) The cannabis tax in subsections (a), (b) and (d) of this section shall constitute the maximum annual cannabis tax permitted to be charged annually with respect to the respective person for such categories, except as stated herein. Beginning on January 1, 2020 for cannabis taxes enacted prior to the 2020 and on January 1, of each succeeding year thereafter for all applicable cannabis taxes, the amount of each maximum tax imposed by subsections (a), (b) and (d) of this section may be adjusted up to the equivalent to the most recent change in the annual average of the Consumer Price Index (“CPI”) for all urban consumers in the San Francisco-Oakland-San Jose areas as published by the United States Government Bureau of Labor Statistics; if the city council by resolution or ordinance increases any such tax however related to the “CPI”, provided, however that no CPI adjustment shall decrease any tax imposed by this section. To the extent the cannabis tax is adjusted by the city council pursuant to this CPI provision, such new tax shall constitute the maximum cannabis tax with respect to the respective business (to be referred to herein as the “maximum tax”). The maximum tax for other categories are described below.

(f) For every person engaged in the business of retail sales of cannabis, cannabis products, industrial hemp, and/or industrial hemp products, including, but not limited to, as a retailer (dispensary) or nonstorefront retailer (retail delivery business), or microbusiness, he or she shall be subject to the cannabis tax of five percent of gross receipts. This cannabis tax shall be the maximum tax for retailers.

(g) For every person engaged in the business of distribution of cannabis and/or cannabis products, he or she shall be subject to the cannabis tax of two percent of gross receipts. This cannabis tax shall be the maximum tax for distribution.

(h) For every person engaged in any other cannabis business activity involving the retail sale of cannabis, cannabis products, industrial hemp and/or industrial hemp products not described in subsections (a) through (g) or exempted pursuant to subsection (b), he or she shall be subject to a cannabis tax of five percent of gross receipts. This cannabis tax shall be the maximum tax for unlisted categories.

(i) The maximum tax is the highest tax that may be levied in each category. The city council may, annually by resolution or ordinance, increase the cannabis tax permanently up to the allowable Maximum Tax. The city council may in its discretion by resolution levy the cannabis tax in any category at rates lower than the maximum tax for each category or all categories of the cannabis tax, provided, however, such lowering of the rate shall not lower any permitted maximum rate in any category. The city council may, by resolution or ordinance, increase or decrease the rate of the medicinal cannabis business tax, including the initial rate of the cannabis tax applicable to medicinal cannabis, independent of other cannabis business tax activities. In addition, the city council may, by resolution or ordinance, increase or decrease the rate of the cannabis business tax on industrial hemp or industrial hemp products, including the initial rate of the tax on industrial hemp or industrial hemp products independent of other cannabis activities. Notwithstanding the foregoing, in no event shall the city council repeal this tax or set any adjusted rate that exceeds the maximum rates calculated pursuant to this section.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

The cannabis tax imposed by this chapter shall be due and payable as follows:

(a) Each person owing a commercial cannabis cultivation tax under this chapter shall, on or before the last day of the month following the close of each calendar quarter, prepare a tax statement and remit to the tax administrator the tax due on the total square footage of canopy space subject to the tax. The square footage tax due shall be paid based on the type of cultivation permit issued by the state and/or the city and the maximum square footage so permitted or licensed or as otherwise specified in Section 5.14.070(c). Each business shall pay on or before the last day of the month following the close of each calendar quarter in four equal installments of the annual tax due. The city may at its discretion determine other methodologies in determining the payment of such tax in order to promulgate collection of said tax in order to reduce the burden of collection which may also include the form of payment in which the city may except for such tax.

(b) Each person owing a cannabis tax for a manufacturing, testing, retail sale or distribution under this chapter shall prepare and submit a tax statement to the tax administrator with the amount of tax owed. Each business shall pay on or before the last day of the month following the close of each calendar quarter in four equal installments of the annual tax due or it will be determined to be delinquent. The tax administrator may publish alternate dates for collection and reporting of the cannabis tax.

(c) All tax statements shall be completed on forms authorized by the tax administrator.

(d) Tax statements and payments for all outstanding taxes owed the city are immediately due to the tax administrator upon cessation of business for any reason.

(e) If requested by the tax administrator as a requirement of the exemption for any period, any person engaged in the sale of industrial hemp and/or industrial hemp products and not subject to the cannabis tax for a reporting period pursuant to Section 15.14.030(13)(J) of the definition of gross receipts shall submit a statement at the time specified by the tax administrator certifying that such person has not been subject to the cannabis business tax for the specified periods or period requested by the tax administrator.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

Whenever any payment, statement, report, request or other communication is due, it must be received by the tax administrator on or before the final due date. A postmark will not be accepted as timely remittance. If the due day falls on Saturday, Sunday or a holiday observed by the city, the due day shall be the next regular business day on which the city is open to the public.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

Unless otherwise specifically provided under other provisions of this chapter, the cannabis taxes required to be paid pursuant to this chapter shall be deemed delinquent if not paid by the tax administrator on or before the due date as specified in Section 5.14.080.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

The tax administrator is not required to send a delinquency or other notice or bill to any person subject to the provisions of this chapter and failure to send such notice or bill shall not affect the validity of any tax or penalty due under the provisions of this chapter.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

(a) Any person who fails or refuses to pay any cannabis tax required to be paid pursuant to this chapter on or before the due date shall pay penalties and interest as follows:

(1) A penalty equal to ten percent of the amount of the tax in addition to the amount of the tax, plus interest on the unpaid tax calculated from the due date of the tax at a rate established by resolution of the city council; and

(2) An additional penalty equal to twenty-five percent of the amount of the tax if the tax remains unpaid for a period exceeding one calendar month beyond the due date, plus interest on the unpaid tax and on the unpaid penalties, calculated at the rate established by resolution of the city council.

(3) Interest shall be applied at the monthly rate on the first day the first day of the month for the full month, and will continue to accrue monthly on the tax and penalty until the balance is paid in full.

(b) Whenever a check is submitted in payment of a cannabis tax and the check is subsequently returned unpaid by the bank upon which the check is drawn, and the check is not redeemed prior to the due date, the taxpayer will be liable for the tax amount due plus the return check fee; penalties and interest as provided for in this section; and any amount allowed under state law.

(c) The cannabis tax due shall be that amount due and payable from the first date on which the person was engaged in business as a cannabis business in the city, together with applicable penalties and interest calculated in accordance with Section 5.14.120(a).

(Res. 4529, 2016; Ord. 793 § 1, 2020)

The tax administrator may waive the first and second penalties each imposed upon any person if:

(1) The person provides evidence satisfactory to the tax administrator that failure to pay timely was due to circumstances beyond the control of the person and occurred notwithstanding the exercise of ordinary care and the absence of willful neglect, and the person paid the delinquent cannabis tax and accrued interest owed the city prior to applying to the tax administrator for a waiver.

(2) The waiver provisions specified in this subsection shall not apply to interest accrued on the delinquent tax and a waiver shall be granted only once during any twenty-four-month period.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

(a) No refund shall be made of any tax collected pursuant to this chapter, except as provided in this section and Section 5.14.150.

(b) No refund of any tax collected pursuant to this chapter shall be made because of the discontinuation, dissolution or other termination of a business.

(c) Any person entitled to a refund of taxes paid pursuant to this chapter may elect in writing to have such refund applied as a credit against such person’s cannabis tax for the next tax reporting period or as authorized by the tax administrator.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

(a) Whenever the amount of any cannabis tax, penalty or interest has been overpaid, paid more than once, or has been erroneously or illegally collected or received by the city under this chapter, it may be refunded to the claimant who paid the tax provided that a written claim for refund is filed with the tax administrator within one year of the date the tax was originally due and payable, and the provisions of Chapter 2.50 are satisfied.

(b) The tax administrator or the tax administrator’s authorized agent shall have the right to examine and audit all the books and business records of the claimant in order to determine the eligibility of the claimant to the claimed refund. No claim for refund shall be allowed if the claimant refuses to allow such examination of claimant’s books and business records after request by the tax administrator to do so. In the event that the cannabis tax was erroneously paid and the error is attributable to the city, the city shall refund the amount of tax erroneously paid up to one year from when the error was identified.

(c) No refund may be had, or tax may be challenged unless the tax has been paid.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

Any person desiring to claim exemption from the payment of the tax set forth in this chapter shall make application upon forms prescribed by the tax administrator and shall furnish such information and make such affidavits as may be required by the tax administrator.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

Except as may be otherwise specifically provided in this chapter, the terms hereof shall not be deemed or construed to apply to any person when imposition of the tax upon that person would violate the Constitution of the United States or that of the state of California or preemptive federal or state law.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

(a) For any person not having a fixed place of business within the city who comes into the city for the purpose of transacting business and who is not otherwise exempt, the cannabis tax payable by such person may be apportioned by the tax administrator in accordance with Section 5.14.220.

(b) The city does not levy a cannabis tax for the cultivation, manufacture, testing or distribution of industrial hemp and/or industrial hemp products.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

The provisions of this chapter shall not apply to personal cannabis cultivation or personal use of cannabis, to the extent those activities are authorized in the “Medicinal and Adult Use Cannabis Regulation and Safety Act,” as may be amended. This section shall not apply to personal use of cannabis that is specifically exempted from state licensing requirements, that meets the definition of personal use or equivalent terminology under state law, and provided that the individual receives no compensation whatsoever related to that personal cultivation or use.

(Ord. 793 § 1, 2020)

It shall be the duty of the tax administrator or designee to enforce each and all of the provisions of this chapter, and the police department shall render such assistance in the enforcement of this chapter as may from time to time be required by the tax administrator.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

For purposes of apportionment as may be required by law and for purposes of administration and enforcement of this chapter generally, the tax administrator, with the concurrence of the city attorney, may from time to time promulgate administrative rules and regulations.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

(a) None of the tax provided for by this chapter shall be applied so as to occasion an undue burden upon interstate commerce or be in violation of the equal protection and due process clauses of the Constitutions of the United States or the state of California.

(b) If any case where a cannabis tax is believed by a taxpayer to place an undue burden upon interstate commerce or be in violation of such constitutional clauses, the taxpayer may apply to the tax administrator for an adjustment of the tax. It shall be the taxpayer’s obligation to request in writing for an adjustment within one year after the date of payment of the tax. If the taxpayer does not request in writing within one year from the date of payment, then taxpayer shall be conclusively deemed to have waived any adjustment for that year and all prior years.

(c) The taxpayer shall, by sworn statement and supporting testimony, show the method of business and the gross volume of business and such other information as the tax administrator may deem necessary in order to determine the extent, if any, of such undue burden or violation. The tax administrator shall then conduct an investigation and shall fix as the tax for the taxpayer an amount that is reasonable and nondiscriminatory, or if the tax has already been paid, shall order a refund of the amount over and above the tax so fixed In fixing the tax to be charged, the tax administrator shall have the power to base the tax upon a percentage of gross receipts or any other measure which will assure that the tax assessed shall be uniform with that assessed on businesses of like nature, so long as the amount assessed does not exceed the tax as prescribed by this chapter.

(d) Should the tax administrator determine that the gross receipt measure of tax to be the proper basis, the tax administrator may require the taxpayer to submit a sworn statement of the gross receipts and pay the amount of tax as determined by the tax administrator.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

(a) The tax administrator, or designee, shall have the power to audit and examine all books and records of persons engaged in cannabis business including both state and federal income tax returns, California sales tax returns, or other evidence documenting the gross receipts of persons engaged in cannabis business, and, where necessary, all equipment, of any person engaged in cannabis business in the city, for the purpose of ascertaining the amount of cannabis tax, if any, required to be paid by the provisions hereof, and for the purpose of verifying any statements or any item thereof when filed by any person pursuant to Sections 5.14.260 through 5.14.280 of any taxes estimated to be due.

(b) It shall be the duty of every person liable for the collection and payment to the city of any tax imposed by this chapter to keep and preserve, for a period of at least three years, all records as may be necessary to determine the amount of such tax as he or she may have been liable for the collection of and payment to the city, which records the tax administrator shall have the right to inspect at all reasonable times.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

The amount of any tax, penalties and interest imposed by the provisions of this chapter shall be deemed a debt to the city and any person carrying on any cannabis business without first having paid such tax shall be liable in an action in the name of the city in any court of competent jurisdiction for the amount of the tax, and penalties and interest imposed on such business.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

If the tax administrator is not satisfied that any statement filed as required under the provisions of this chapter is correct, or that the amount of tax is correctly computed, he or she may compute and determine the amount to be paid and make a deficiency determination upon the basis of the facts contained in the statement or upon the basis of any information in his or her possession or that may come into his or her possession within three years of the date the tax was originally due and payable. One or more deficiency determinations of the amount of tax due for a period or periods may be made. When a person discontinues engaging in a business, a deficiency determination may be made at any time within three years thereafter as to any liability arising from engaging in such business whether or not a deficiency determination is issued prior to the date the tax would otherwise be due. Whenever a deficiency determination is made, a notice shall be given to the person concerned in the same manner as notices of assessment are given under Sections 5.14.260 through 5.14.280.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

(a) Under any of the following circumstances, the tax administrator may make and give notice of an assessment of the amount of tax owed by a person under this chapter at any time:

(1) If the person has not filed any statement required under the provisions of this chapter;

(2) If the person has not paid any tax due under the provisions of this chapter;

(3) If the person has not, after demand by the tax administrator, filed a corrected statement, or furnished to the administrator adequate substantiation of the information contained in a statement already filed, or paid any additional amount of tax due under the provisions of this chapter;

(4) If the tax administrator determines that the nonpayment of any business tax due under this chapter is due to fraud, a penalty of twenty-five percent of the amount of the tax shall be added thereto in addition to penalties and interest otherwise stated in this chapter.

(b) The notice of assessment shall separately set forth the amount of any tax known by the tax administrator to be due or estimated by the tax administrator, after consideration of all information within the tax administrator’s knowledge concerning the business and activities of the person assessed, to be due under each applicable section of this chapter, and shall include the amount of any penalties or interest accrued on each amount to the date of the notice of assessment.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

The notice of assessment shall be served upon the person either by handing it to him or her personally, or by a deposit of the notice in the United States mail, postage prepaid thereon, addressed to the person at the address of the location of the business or to such other address as he or she shall register with the tax administrator for the purpose of receiving notices provided under this chapter; or, should the person have no address registered with the tax administrator for such purpose, then to such person’s last known address. For the purposes of this section, a service by mail is complete at the time of deposit in the United States mail.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

Within ten days after the date of service the person may apply in writing to the tax administrator for a hearing on the assessment. If application for a hearing before the city is not made within the time herein prescribed, the tax assessed by the tax administrator shall become final and conclusive. Within thirty days of the receipt of any such application for hearing, the tax administrator shall cause the matter to be set for hearing before him or her not later than thirty-five days after the receipt of the application, unless a later date is agreed to by the tax administrator and the person requesting the hearing. Notice of such hearing shall be given by the tax administrator to the person requesting such hearing not later than five days prior to such hearing. At such hearing said applicant may appear and offer evidence why the assessment as made by the tax administrator should not be confirmed and fixed as the tax due. After such hearing the tax administrator shall determine and reassess the proper tax to be charged and shall give written notice to the person in the manner prescribed in Section 5.14.270 for giving notice of assessment.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

The conviction and punishment of any person for failure to pay the required tax shall not excuse or exempt such person from any civil action for the tax debt unpaid at the time of such conviction. No civil action shall prevent a criminal prosecution for any violation of the provisions of this chapter or of any state law requiring the payment of all taxes.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

Any person violating any of the provisions of this chapter or any regulation or rule passed in accordance herewith, shall be deemed guilty of a misdemeanor, and upon conviction thereof shall be punishable by a fine of not more than five hundred dollars or by imprisonment for a period of not more than six months, or by both such fine and imprisonment.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

Should any provision of this chapter, or its application to any person or circumstance, be determined by a court of competent jurisdiction to be unlawful, unenforceable or otherwise void, that determination shall have no effect on any other provision of this chapter or the application of this chapter to any other person or circumstance and, to that end, the provisions hereof are severable.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

(a) Unless specifically provided otherwise, any reference to a state or federal statute in this chapter shall mean such statute as it may be amended from time to time, provided that such reference to a statute herein shall not include any amendment thereto, or to any change of interpretation thereto by a state or federal agency or court of law with the duty to interpret such law, to the extent that such amendment or change of interpretation would under California law, require voter approval of such amendment or interpretation, or to the extent that such change would result in a tax decrease. To the extent voter approval would otherwise be required or a tax decrease would result, the prior version of the statute (or interpretation) shall remain applicable; for any application or situation that would not require voter approval or result in a decrease of a tax, provisions of the amended statute (or new interpretation) shall be applicable to the maximum possible extent.

(b) To the extent that the city’s authorization to collect or impose any tax imposed under this chapter is expanded as a result of changes in state or federal law, no amendment or modification of this chapter shall be required to conform the tax to those changes, and the tax shall be imposed and collected to the full extent of the authorization up to the full amount of the tax imposed under this chapter.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

All remedies and penalties prescribed by this chapter or which are available under any other provision of law or equity, including, but not limited to, the California False Claims Act (Government Code Section 12650 et seq.) and the California Unfair Practices Act (Business and Professions Code Section 17070 et seq.), are cumulative. The use of one or more remedies by the city shall not bar the use of any other remedy for the purpose of enforcing the provisions of this chapter.

(Res. 4529, 2016; Ord. 793 § 1, 2020)

Chapter 5.14 of the King City Code may be amended or modified by the city council without a vote of the people. However, as required by Chapter XIIIC of the California Constitution, voter approval is required for any amendment provision that would increase the rate of any tax levied pursuant to this chapter. The people of the city of King affirm that the following actions shall not constitute an increase of the rate of a tax:

(1) The restoration of the rate of the tax to a rate that is no higher than the maximum tax for any person permitted by this chapter, if the city council has acted to reduce the rate of the tax;

(2) An action that interprets or clarifies the methodology of the tax, or any definition applicable to the tax, so long as interpretation or clarification (even if contrary to some prior interpretation or clarification) is not inconsistent with the language of this chapter;

(3) The establishment of a class of person that is exempt or excepted from the tax or the discontinuation of any such exemption or exception (other than the discontinuation of an exemption or exception specifically set forth in this chapter); or

(4) The collection of the tax imposed by this chapter, even if the city had, for some period of time, failed to collect the tax.

(Res. 4529, 2016; Ord. 793 § 1, 2020)