Maywood Municipal Code Art. 3 Commercial Cannabis Activity Tax

This article shall be known as the Commercial Cannabis Activity Tax Ordinance.

(Ord. No. 18-17-1, 7-25-2018)

The purpose of this article is to adopt a business license tax, for revenue purposes, pursuant to §§ 37101 and 37100.5 of the California Government Code, upon commercial cannabis activities that occur, in whole or in part, in the City. The commercial cannabis activity tax is levied based upon business gross receipts. It is not a sales and use tax, a tax upon income, a transient occupancy tax, utility user tax, or a tax upon real property, and does not change any obligations under those taxes.

The commercial cannabis activity tax is a business license tax on commercial cannabis activities and is being levied in lieu of any other non-cannabis related business license taxes as described under Title 3, Chapter 1 of this Code. The administration of the commercial cannabis activity tax shall otherwise be the same as the general (non-cannabis related) business license taxes as described under Title 3, Chapter 1, except as described herein. Any business license issued pursuant to this article requires that a person first obtain a city commercial cannabis permit, pursuant to Ordinance 17-07.

The commercial cannabis activity tax is a business license tax enacted solely for general governmental purposes of the City and not for specific purposes. All of the proceeds from the tax imposed by this article shall be placed in the City's general fund and be available for any lawful municipal purpose.

(Ord. No. 18-17-1, 7-25-2018)

The intent of this article is to levy a business license tax on all commercial cannabis activity in the City, regardless of whether such business would have been legal at the time this article was adopted. Nothing in this article shall be interpreted to authorize or permit any business activity that would not otherwise be legal or permissible under State laws or local ordinances applicable to the activity at the time the activity is undertaken.

(Ord. No. 18-17-1, 7-25-2018)

All definitions provided for in Ordinance No. 17-07 ("Commercial Cannabis Ordinance") are hereby incorporated by reference, as well as the following words and phrases, which shall have the meanings set forth below when used in this article:

"Cannabis" means all parts of the plant of the genus 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" also means the separated resin, whether crude or purified, obtained from cannabis. "Cannabis" also means marijuana as defined by § 11018 of the California Health and Safety Code and is not limited to medical cannabis. "Cannabis" and "marijuana" shall have the same meaning where "marijuana" may appear, including but not limited to its use in Ordinance 17-07 and other related ordinances.

"Commercial cannabis business" and "commercial cannabis activity" shall include all activities engaged in or caused to be engaged in, in whole or in part, 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.

"Commercial cannabis activity tax," or "business license tax," or "license tax," means the business license tax due pursuant to this article for engaging in a commercial cannabis activity in the City, unless otherwise stated, and does not authorize commercial cannabis activity (see> Ordinance 17-07).

"Cannabis accessories" means any equipment, products or materials of any kind which are used, intended for use, or designed for use in planting, propagating, cultivating, growing, harvesting, manufacturing, compounding, converting, producing, processing, preparing, testing, analyzing, packaging, repackaging, storing, smoking, vaporizing, or containing cannabis, or for ingesting, inhaling, or otherwise introducing cannabis or cannabis products into the human body, as defined by California Health and Safety Code § 11018.2, and includes, without limitation, the retail sales of t-shirts, sweaters, hats, stickers, key chains, bags, books, posters, or other Personal tangible property unless the City Administrator has excluded the item in writing by issuing an administrative ruling per § 3-7.114. However, any business activities not subject to this article as a result of the City Administrator's ruling shall be subject to the appropriate business license tax provisions of Title 3 Chapter 1 or any other chapter or article as determined by the City Administrator.

"Cannabis products" means cannabis that has undergone a process whereby the plant material has been transformed into a concentrate, including, but not limited to, concentrated cannabis, or an edible or topical product containing cannabis or concentrated cannabis and other ingredients, as defined by California Health and Safety Code § 11018.1, and without limitation, includes extract, distillate, kief, preroll, and is not limited to medical cannabis products.

"City business license" means a business tax license issued by the City to a person engaged in commercial cannabis activity within the City, subject Ordinance 17-07, as may be amended.

"Cultivation" means any activity involving the planting, growing, harvesting, drying, curing, grading, or trimming of cannabis.

"Distribution" means a person who transports cannabis, cannabis products, and/or cannabis accessories between licensed cannabis businesses.

"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 commercial cannabis activity" means the commencing, conducting, operating, managing, or carrying on of a commercial cannabis business, 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, whether conducted in whole or in part within the City. A person shall be deemed engaged in commercial cannabis activity within the City if:

1. Such person or person's employee maintains a fixed place of business within the City for the benefit or partial benefit of such person;

2. Such person or person's employee owns or leases real property within the City for business purposes;

3. 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;

4. Such person or person's employee regularly conducts solicitation of business within the City; or

5. Such person or person's employee performs work or renders services in the City.

The foregoing specified activities shall not be a limitation on the meaning of "engaged in commercial cannabis activity," as may be determined by the City Administrator.

"Evidence of doing business" means evidence such as, without limitation, use of signs, circulars, cards or any other advertising media, including the use of internet or telephone solicitation, or representation to a government agency or to the public that such person is engaged in a commercial cannabis business in the City.

"Gross receipts," except as otherwise specifically provided, means, whether designated a sales price, royalty, rent, 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:

1. Cash discounts where allowed and taken on sales;

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

3. 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;

4. Receipts derived from the occasional sale of used, obsolete, or surplus trade fixtures, machinery, or other equipment used by the taxpayer in the regular course of the taxpayer's business;

5. Cash value of sales, trades or transactions between departments or units of the same business;

6. 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;

7. Receipts of refundable deposits, except that such deposits when forfeited and taken into income of the business shall not be excluded when in excess of one dollar and no/100ths ($1.00);

8. 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 City's 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.

"Manufacture" means to compound, blend, extract, infuse, or otherwise make or prepare cannabis products.

"Manufacturer" means the production, preparation, propagation, or compounding of cannabis or cannabis products either directly or indirectly or by extraction methods, or independently by means of chemical synthesis, or by a combination of extraction and chemical synthesis at a fixed location that packages or repackages cannabis or cannabis products or labels or relabels its container.

"Marijuana." See "cannabis."

"Microbusiness" means a person holding a license issued by the State of California under paragraph (3) of subdivision (a) of the California Business and Professions Code § 26070, and pursuant to the issuance of a license by the City, who engages in at least three (3) of the four (4) following activities: (A) cultivation of cannabis on an area less than ten thousand (10,000) square feet, (B) distribution, (C) manufacturing, and/or (D) retail (storefront and/or delivery).

"Non-storefront retail" means a business engaged in the retail delivery of cannabis, cannabis products, and/or cannabis accessories who does not have a premises which is open to the public.

"Person" includes and individual, firm, partnership, joint venture, association, corporation, limited liability company, estate, trust, business trust, receiver, syndicate, or any other group or combination acting as a unit, and the plural as well as the singular.

"Premises" means the designated structure or structures and land specified in the permit that is owned, leased, or otherwise held under the control of the permittee or licensee where the commercial cannabis activity will be or is conducted. The premises shall be a contiguous area and shall only be occupied by one (1) licensee.

"Processing" means a cultivation site that conducts only trimming, drying, curing, grading, packaging, or labeling of cannabis and nonmanufactured cannabis products.

"Sale," "sell," and "to sell" means and includes any sale, exchange, or barter. It shall also mean any transaction whereby, for any consideration, title to cannabis or cannabis products are transferred from one (1) person to another and includes the delivery of cannabis or cannabis products pursuant to an order placed for the purchase of the same and soliciting or receiving an order for the same but does not include the return of cannabis or cannabis products by a licensee to the licensee from whom the cannabis or cannabis product was purchased.

"State" means the State of California.

"State license" means a State license issued pursuant to California Business and Professions Code §§ 26000 et seq., California Code of Regulations §§ 5000 et seq., and/or other applicable State laws and regulations, as may be amended.

"Storefront retail," or "brick-and-mortar," or "dispensary" means a place open to the public for retail transactions of cannabis, cannabis products, and/or cannabis accessories.

"Testing laboratory" means a commercial cannabis laboratory, facility, or entity that offers or performs tests of cannabis or cannabis products that that is both (A) accredited by an accrediting body that is independent from all other persons involved in commercial cannabis activity in the State, as may be amended, and (B) licensed by the Bureau of Cannabis Control.

(Ord. No. 18-17-1, 7-25-2018)

A. Beginning January 1, 2019, there is imposed upon each person who is engaged in a commercial cannabis activity a commercial cannabis activity tax. Such tax is payable regardless of whether the business has been issued a permit to operate lawfully in the City or is operating unlawfully. The City's acceptance of a tax payment under this article from a commercial cannabis business operating illegally will not constitute the City's approval, license, or consent to such illegal operations.

B. The initial rate of the commercial cannabis activity tax shall be as follows:

1. Every person who engages in commercial cannabis cultivation shall be subject to six percent (6%) of gross receipts.

2. For every person who engages in the operation of a commercial cannabis testing laboratory shall be subject to six percent (6%) of gross receipts.

3. Every person who engages in commercial cannabis storefront retail operations shall be subject to six percent (6%) of gross receipts.

4. Every person who engages in commercial cannabis as a microbusiness shall be subject to six percent (6%) of gross receipts.

5. Every person who engages in commercial cannabis distribution shall be subject to six percent (6%) of gross receipts.

6. Every person who engages in commercial cannabis manufacturing shall be subject to six percent (6%) of gross receipts.

7. Every person who engages any other type of commercial cannabis activity not described in subsections 1—5 above, shall be subject to six percent (6%) of gross receipts.

C. The City Council may, by resolution or ordinance and without voter approval, adjust the rate of the commercial cannabis activity tax, and may set separate rates for the various commercial cannabis activities and business-types described above. However, in no event may the City Council set or cause any adjusted rate that exceeds the maximum rate calculated pursuant to subsection D of this section for the date on which the adjusted rate will commence.

D. The maximum rate of the commercial cannabis activity tax shall be ten percent (10%) of gross receipts.

(Ord. No. 18-17-1, 7-25-2018)

A. Persons subject to the commercial cannabis activity tax shall meet the requirements under Title 3 Chapter 1 "Business Licensing," as pertains to the administration of this tax, including without limit to the registering, reporting, payment, communications, timely remittance, notice, penalties and interest, refunds and credits, related fees, and procedures for business tax licenses.

However, such persons shall be exempt from paying the general business license tax as described under Section 3-1.202 and shall instead be subject to the provisions of this article for any commercial cannabis activity as determined by the City Administrator, and pursuant to any exclusion definitions as may be determined by the City Administrator, or designee.

B. If any conflict is found between Title 3 Chapter 1 and this article, this article shall be controlling. Interpretations shall be the responsibility of the City Administrator.

C. Upon cessation of commercial cannabis activity, tax statements and payments shall be immediately due for all calendar months up to the calendar month during which cessation occurred.

D. The City Administrator may, at his or her discretion, establish alternative reporting and payment periods for any taxpayer under this article as the City Administrator deems necessary to ensure effective collection of the tax. The City Administrator may also require that a deposit be applied against the taxes for a calendar month. In no event shall the deposit required by the City Administrator exceed the tax amount he or she projects will be owed by the taxpayer for the calendar month.

(Ord. No. 18-17-1, 7-25-2018)

The provisions of this article shall not apply to personal cannabis cultivation or use as those activities are authorized in the "Medicinal and Adult Use Cannabis Regulation and Safety Act." This article 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. No. 18-17-1, 7-25-2018)

A. It shall be the duty of the City Administrator to collect the taxes, penalties, fees, and perform the duties required by this article and as otherwise defined by this chapter.

B. For purposes of administration and enforcement of this article generally, the City Administrator may take such administrative actions and from time to time promulgate such administrative interpretations, rules, and procedures consistent with the purpose, intent, and express terms of this article as he or she deems necessary to implement or clarify such provisions or aid in enforcement, or as needed to administer the tax.

(Ord. No. 18-17-1, 7-25-2018)

Any taxpayer aggrieved by any decision of the City Administrator with respect to the amount of tax, interest, penalties and fees, if any, due under this article may appeal to the City pursuant to Title 1, Chapter 4 "Appeals" of this Code.

(Ord. No. 18-17-1, 7-25-2018)

If a business subject to the commercial cannabis activity tax is operating both within and outside the City, it is the intent of the City to apply the commercial cannabis activity tax so that the measure of the tax fairly reflects the proportion of the taxed activity actually carried on in the City. To the extent federal or State law requires that any tax due from any taxpayer be apportioned, the taxpayer may indicate said apportionment on his or her tax return. The City Administrator may promulgate administrative procedures for apportionment as he or she finds useful or necessary.

(Ord. No. 18-17-1, 7-25-2018)

This tax is intended to be applied in a manner consistent with the United States and California Constitutions and State law, and City ordinances. None of the tax provided for by this article shall be applied in a manner that causes an undue burden upon interstate commerce, a violation of the equal protection or due process clauses of the Constitutions of the United States or the State of California or a violation of any other provision of the California Constitution, State law, or City ordinances. If a person believes that the tax, as applied to him or her, is impermissible under applicable law, he or she may request that the City Administrator release him or her from the obligation to pay the impermissible portion of the tax.

(Ord. No. 18-17-1, 7-25-2018)

A. For the purpose of ascertaining the amount of commercial cannabis activity tax owed or verifying any representations made by any taxpayer to the City in support of his or her tax calculation, the City Administrator shall have the power to inspect any location where a commercial cannabis activity, or any related business transactions or operations occur and to audit and examine all books and records (including, but not limited to bookkeeping records, State and federal income tax returns, and other records relating to the gross receipts of the business) of persons engaged in a commercial cannabis activity. In conducting such investigation, the City Administrator shall have the power to inspect any equipment, such as computers or point of sale machines, that may contain such records.

B. It shall be the duty of every person liable for the collection and payment to the City of any tax imposed by this article to keep and preserve, for a period of at least three (3) 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 City Administrator or his/her designee shall have the right to inspect at all reasonable times.

(Ord. No. 18-17-1, 7-25-2018)

A. Licensure under this article shall not be deemed to repeal or be in lieu of or replace any requirements for any City commercial cannabis activity permit requirements by, under or by virtue of any provision of any other chapter or article 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 under any other chapter of this Code or any other ordinance or resolution of the City.

B. Any references made or contained in any other chapter of this Code to any licenses, license taxes, fees, or charges, or to any schedule of license fees, shall be deemed to refer to the licenses, license taxes, fees or charges, or schedule of license fees, provided for in the other chapter of this Code.

C. Notwithstanding subsection A of this section a commercial cannabis activity business shall not be required to pay the business license tax required by Title 3, Chapters 1 or 2 of this Code so long as all of the commercial cannabis activities within the City that would require payment of a license tax are activities subject to the commercial cannabis activity tax.

D. The City Administrator may revoke or refuse to renew the license required by this Article for any business that is delinquent in the payment of any tax due pursuant to this article or other relevant provisions of this Code, or that fails to make a deposit as may be required by the City Administrator pursuant to Section 3-1.306.

(Ord. No. 18-17-1, 7-25-2018)

A. The payment of a commercial cannabis activity tax required by this article, and its acceptance by the City, shall not entitle any person to carry on any commercial cannabis activity unless the person has complied with all of the requirements of this Code and all other applicable State and local laws and regulations.

B. No payment accepted by the City under the provisions of this article shall be construed as granting a license or authorizing the conduct or continuance of any illegal or unlawful business, or any business in violation of any local or State law or regulation.

(Ord. No. 18-17-1, 7-25-2018)

Until a City commercial cannabis permit has first been obtained from the Council, upon an application in writing therefor, no license shall be issued under the provisions of this article.

(Ord. No. 18-17-1, 7-25-2018)

If any section, subsection, sentence, clause, or phrase of this article is for any reason held to be invalid, such decision shall not affect the validity of the remaining portions of this article. The City Council hereby declares that it would have passed, via the electorate, this article and each section, subsection, sentence, clause and phrase thereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses, or phrases be declared invalid.

(Ord. No. 18-17-1, 7-25-2018)

All remedies and penalties prescribed by this article or which are available under any other provision of this Code and any other provision of law or equity 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 article.

(Ord. No. 18-17-1, 7-25-2018)

This article may be repealed or amended by the City Council without a vote of the people to the extent allowed by law. However, as required by Article XIIIC of the California Constitution, voter approval is required for any amendment that would increase the rate of any tax levied pursuant to this article. The people of the City of Maywood affirm that the following actions shall not constitute an increase of the rate of a tax or a waiver of a tax:

A. The restoration or adjustment of the rate of the tax to a rate that is no higher than that set by this article, if the City Council has acted to reduce the rate of the tax or incrementally implement an increase authorized by this article;

B. 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 article; or

C. The collection of the tax imposed by this article even if the City had, for some period of time, failed to collect the tax.

(Ord. No. 18-17-1, 7-25-2018)

The taxes imposed by this article may be adjusted annually by the City Administrator or City Council, subject to the maximum tax described in subsection 3-1.305D. Beginning on January 1, 2019, and on January 1 each succeeding year thereafter, the amount of each tax imposed by this article may be adjusted up to an amount equivalent to the most recent change in the annual average of the Consumer Price Index (CPI) for all urban consumers in the Los Angeles-Riverside-Orange County areas as published by the United States Government Bureau of Labor Statistics; however, no adjustment is required to decrease any tax imposed by this article. For the purpose of calculating the annual adjustment factor under this section, the base year shall be that year ending with December 31, 2016. Rates shall next be adjusted on January 1, 2019, and annually thereafter, based on the annually calculated change from the base year. The January 1, 2019 adjustment may be the change in the average CPI for the year ending December 31, 2017 compared to the base year ending December 31, 2016.

(Ord. No. 18-17-1, 7-25-2018)

If any person, while liable for any amount under this article, sells, assigns or otherwise transfers the commercial cannabis activity business, whether voluntarily or involuntarily, the person's successor, assignee or other transferee, or other persons or entity obtaining ownership or control of the business ("transferee"), shall satisfy any tax liability owed to the City associated with the business when due hereunder. Failure to do so for the benefit of the City will result in being personally liable to the City for the full amount of the unpaid tax liability, interest, and penalties. The transferee shall notify the City Administrator of the date of transfer at least thirty (30) days before the transfer date; or if the agreement to sell, transfer, or otherwise dispose of the business was made less than thirty (30) days before the date of transfer, notice shall be provided immediately upon the existence of the agreement.

The transferee shall be deemed to have complied with the requirements of this section to satisfy the unpaid tax liability if the transferee complies with the requirements of California Revenue and Taxation Code § 7283.5 by withholding from the purchase price, for the benefit of the City, an amount sufficient to cover the tax liability, or by otherwise paying the tax liability and obtaining from the City Administrator a "tax clearance certificate" showing that all outstanding tax liability has been paid and stating that no amount is due through the date of transfer.

The City Administrator, within ninety (90) days of receiving a written request from a transferee, may issue a "tax clearance certificate" stating either the amount of tax liability due and owing for the business, or stating that there is no tax liability due and owing for the business through a stated date. The City Administrator may also request financial records from the current or former owner on operator to audit the tax that may be due and owing. The City Administrator shall issue a tax clearance certificate within thirty (30) days of completing the audit, stating the amount of the tax liability owed, if any, unless the City Administrator determines that the records provided in connection with the audit are insufficient to determine whether taxes are due and owed or in what amount. If the City Administrator determines that the records are insufficient, the City Administrator may rely on the facts and information available to estimate any tax liability. The City Administrator may issue a tax clearance certificate stating the amount of the tax liability, if any, based on such facts and information available. Unless an appeal is filed in accordance with Title 1, Chapter 4 "Appeals" of this Code, the tax clearance certificate shall serve as conclusive evidence of the tax liability associated with the property through the date stated on the certificate.

(Ord. No. 18-17-1, 7-25-2018)

Commercial cannabis activity under this article shall be conducted in accordance with State laws and regulations, as may be amended. In the event of a conflict between the City's and State's laws and regulations regarding commercial cannabis activity, the State's laws and regulations shall control.

(Ord. No. 18-17-1, 7-25-2018)

This article supersedes any language in any prior ordinances that is contrary to the provisions of this article.

(Ord. No. 18-17-1, 7-25-2018)

Commercial cannabis activity under this article shall not be subject to any exclusions or exemptions unless provided for under this article.

(Ord. No. 18-17-1, 7-25-2018)

This article will take effect immediately if a majority (50% + 1) of those voting on this ballot measure cast a "yes" vote at the general municipal election of November 6, 2018.

(Ord. No. 18-17-1, 7-25-2018)