Santa Ana Municipal Code § 21-138 Violation deemed misdemeanor—Penalty

This article is required for the purpose of fixing the rate of taxation for commercial cannabis businesses including delivery, distribution, manufacturing, cultivation, testing and retail sales of cannabis and related products. This article does not apply to medical marijuana collectives/cooperatives (also referred to as medicinal cannabis retail businesses) which are subject to a business license tax under article XII of this chapter. The taxes required to be paid under this article are declared to be required pursuant to the taxing power of the City of Santa Ana solely for the purpose of obtaining revenue and are not regulatory permit fees.

(Ord. No. NS-2962, § 2(Exh. A-1), 11-6-18)

Every person engaged in a "commercial cannabis business" or "commercial cannabis activity" shall pay an annual business license tax as outlined below. This Article shall not apply, except with respect to medical marijuana cooperatives/collectives (also referred to as medicinal commercial cannabis medicinal retail businesses) which are vertically and/or horizontally integrated with commercial cannabis businesses, to medical marijuana cooperatives/collectives which are governed by Article XII of this Chapter, or to personal cultivation as defined in section 40-101(b) of this Code.

(a) For each branch establishment or separate property location of a commercial cannabis business transacted and carried on in the city, and for each separate type of commercial cannabis business conducted at the same location, the higher of the two (2) following tax rates shall be due to the City for each monthly reporting period:

(1) Up to ten (10) percent of each dollar of gross receipts received or generated for each monthly reporting period.

(2) Up to thirty-five dollars ($35.00) per square foot (annual tax rate) prorated monthly to one-twelfth ( 1/12 ) of the annual tax rate amount.

(b) These tax rates shall not be adjusted for inflation pursuant to section 21-121 of this Chapter.

(c) Notwithstanding the tax rates imposed herein under subsection (a), the City Council may, in its discretion, at any time by resolution, implement any lower tax rate it deems appropriate, and may by resolution increase such tax rate from time to time, not to exceed the maximum rates established by subsection (a).

(d) As of the operative date of this Article, the business license gross receipts tax rates and square footage tax rates application to specific commercial cannabis business activities have been established by city ordinance [(Ordinance No. NS-2962, Section 2 (Exhibit A-1), adopted 11-6-18; and Ordinance No. NS-2972, Section 7, adopted 9-3-19)] and by the following resolutions as referenced herein below in subsections (s), (t), and (u).

With respect to commercial cannabis businesses not having a fixed place of business within the city but conducting regular, non-incidental commercial cannabis business activities within the city, such businesses shall be subject to the gross receipts tax rate(s) pursuant to this Article based on the category/categories of commercial cannabis activity conducted. However, such out-of-town commercial cannabis businesses shall not be subject to any gross square footage tax rate(s).

(e) As part of the annual gross receipts/square footage tax(es) imposed by this Article, each commercial cannabis business located within the city shall pay a minimum basic rate of two thousand dollars ($2,000.00) annually for each branch establishment or separate property location of the commercial cannabis business transacted and carried on in the city, and for each separate type of commercial cannabis business conducted at the same location. Commercial cannabis businesses having no fixed place of business within the city shall be exempted from this requirement. Provided, however, as follows:

(1) that commercial cannabis microbusinesses shall pay a minimum basic rate of two thousand dollars ($2,000.00) annually for each branch establishment or separate property location of the commercial cannabis business transacted and carried on in the city, but not for each separate type of commercial cannabis business conducted at the same location; and

(2) that City licensed commercial cannabis retail businesses which are also licensed by the City for adult-use cannabis retail business (temporary consumption and/or special events), or socially equitable adult-use cannabis retail business (temporary consumption and/or special events) shall pay a minimum basic rate of two thousand dollars ($2,000.00) annually for each branch establishment or separate property location of the commercial cannabis business transacted and carried on in the city, but not for each separate type of commercial cannabis retail business conducted at the same location; and

(3) that whenever in the discretion of the Collector, for the purposes of more fully achieving the intent of this Article, or to more efficiently and equitably administer the provisions of this Article, additional administrative commercial cannabis business licenses are required to allow the for the recognition of fee-exempt activities, or to allow for the separate accounting and apportionment of one (1) or more taxable endeavors relating to sub-activities incorporated within a consolidated commercial cannabis tax activity under subsection (d), then the Collector shall require that the affected commercial cannabis business obtain such administrative license(s), and in the case of taxable activities, separately report and pay the applicable gross receipts tax(es) due under the consolidated commercial cannabis tax activity to which said administrative license(s) relate. In such case, the minimum basic rate of two thousand dollars ($2,000.00) annually per license, shall not be applied, however, such administrative license(s) are subject to all other requirements under this Chapter, including all applicable licensing charges and service fees.

(f) In the event the City should in the future permit additional categories of commercial cannabis business activity, as may from time to time be licensed by the State of California, such categories of commercial cannabis activities shall be subject to the same maximum tax rates as imposed herein. The City may by ordinance of the City Council initially set the required gross receipts/gross square footage tax rates based on category of cannabis business activity at lesser rates as may be deemed appropriate by the City Council.

(g) For purposes of this Article, a commercial cannabis business is not considered to be a business or person having a "specified exemption" or "specified exclusion" from business license taxation as set forth in sections 21-48 and 21-49 of this Chapter.

(h) For purposes of this Article any person claiming an exemption from the gross receipts tax rate component of the combined gross receipts/square footage tax imposed under this Article on the basis of a claim of being a qualified "nonprofit organization" shall have the burden of substantiating their claim to the same extent and in the same manner as a marijuana collective/cooperative in accordance with section 21-127(a)(6) of this Chapter.

(i) Cannabis businesses shall not pass the taxes imposed by this Article through to an adult-use cannabis retail business customer or commercial cannabis business customer in any fashion except as part of the basic product sales and/or service price.

(j) Definitions. For purposes of this Article, the following terms have the following meanings:

(1) "Adult-Use cannabis retail business" as defined in section 40-2(4) of this Code.

(2) "Commercial Cannabis Activity" as defined in section 40-2(9) of this Code.

(3) "Commercial cannabis business" as defined in section 40-2(10) of this Code excluding medical marijuana collectives/cooperatives also referred to as medicinal cannabis retail sales.

(4) "Commercial cannabis adult-use retail business" as defined in section 40-2(39.4).

(5) "Consumption Lounge" as defined in section 40-2(39.1) of this Code.

(6) "Cultivation" as defined in section 40-2(11) of this Code.

(7) "Delivery" as defined in section 40-2(13) of this Code.

(8) "Distribution" as defined in section 40-2(16) of this Code.

(9) "Gross receipts" - section 21-3 of this Chapter notwithstanding, "gross receipts" for the purposes of this Article shall mean:

(A) Transfer of title or possession, exchange or barter, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property for a consideration including any monetary consideration for cannabis, including, but not limited to, membership dues, reimbursements provided by members, regardless of form, or the total amount of cash or in-kind contributions, including all operating costs related to the growth, cultivation, manufacturing, distribution, testing, or provision of cannabis or any transaction related thereto;

(B) Anything else of value obtained by an a cannabis business;

(C) The total amount of the sale price of all sales and services;

(D) The total amount charged or received for the performance of any act, service or employment of whatever nature it may be, whether or not such service, act or employment is done as a part of or in connection with the sale of goods, wares, or merchandise (whether at wholesale or retail), for which a charge is made or credit allowed, including all refunds, cash credits and properties of any amount or nature;

(E) Any amount for which credit is allowed by the seller to the purchaser without any deduction therefrom, on account of the cost of the property sold, the cost of materials used, the labor or service cost, interest paid or payable, losses, or any other expense whatsoever; provided that cash discounts allowed or payment on sales shall not be included;

(F) The amount of any federal manufacturer's or importer's excise tax included in the price of property sold, even though the manufacturer or importer is also the retailer thereof;

(G) The amount of any California state cannabis excise tax or state cannabis cultivation tax included in the price of the product;

(H) "Gross receipts" shall not include the following:

i. The amount of any federal tax imposed on or with respect to retail or wholesale sales or the sale of services whether imposed upon the cannabis business or the consumer whenever the amount of federal tax is authorized by law to be stated and passed through to customers as a separate charge.

ii. Any California state, county, or city sales or use tax, including any add-on, district, or transaction and use tax, required by law to be included in or added to the purchase price and collected from the consumer or purchaser, or such part of the sales price of any property previously sold and returned by the purchaser to the seller which is refunded by the seller by way of cash or credit allowances given or taken as part payment on any property so accepted for resale; or

iii. The amount of the sale price of business personal property (all property owned or leased by a cannabis business operator used in the operation cannabis business activities, including, but not limited to: furniture, fixtures, and business equipment); real property, including land, buildings and other improvements.

iv. The amount of equity contributions, investments, and/or loan proceeds to cannabis business' operation, and/or proceeds from the sale or transfer of cannabis business' retail or commercial cannabis business.

v. The amount of interparty sales and/or transfers of goods within a single vertically and/or horizontally integrated cannabis business, where the sales or transfers goods are between two (2) or more commercial cannabis business licensees (excluding testing facilities or testing laboratories), or one (1) or more said commercial cannabis business licensee(s) and one (1) or more medicinal cannabis retail business licensee(s), as set forth in accordance with section 21-131.2 and/or section 21-142.

(I) "Gross receipts" shall be calculated without any deduction on account of any of the following:

i. The cost of tangible or intangible property sold or bartered;

ii. The cost of materials or products used, labor or service cost, interest paid, losses, or other expense;

iii. The cost of transportation of cannabis, or other property or product;

iv. The amount of any federal or state income or franchise taxes; and

v. Any other business costs or expenses, unless otherwise specifically exempted.

(10) "Gross square foot" or "gross square footage" for the purposes of this Article shall mean:

(A) In the case of commercial cannabis businesses licensed by the state to engage in an adult-use cannabis retail business, the gross number of square feet comprising the adult-use cannabis retail property location as confirmed by the corresponding "approved building set" or "approved certificate of occupancy" on file with the City of Santa Ana Planning and Building Agency, whichever is the greater of any square footage indicated, whether such adult-use cannabis retail business is part of an on-site vertically or horizontally integrated cannabis business or not.

(B) In the case of commercial cannabis businesses licensed by the state to engage in cultivation, the aggregate number of square feet comprising all areas of the premises under "canopy," whether such sum is greater or lesser than the gross square footage as stated in the "approved building set" or "approved certificate of occupancy," and whether such commercial cannabis cultivation business is part of an on-site vertically integrated cannabis business or not.

"Canopy" shall mean the designated area(s) of a premises that will contain mature plants at any point in time. Canopy shall be calculated in square feet and measured using clearly identifiable boundaries of all area(s) that will contain mature plants at any point in time, including all of the space(s) within the boundaries. Canopy may be noncontiguous, but each unique area included in the total canopy calculation shall be separated by an identifiable boundary which includes interior walls, shelves, greenhouse walls, hoop house walls, garden benches, hedgerows, fencing, garden beds, or garden plots; and if mature plants are being cultivated using a shelving system, the surface area of each level shall be included in the total canopy calculation.

Canopy shall be subject to independent measurement and calculation by duly authorized employees or agents of the City at the time of application for a Santa Ana Business License and annually thereafter at the time of the renewal of such license, or more often as may be deemed necessary in the discretion of the collector. Whenever an independent canopy measurement and calculation is required under the terms of this Article or whenever the collector in his or her discretion determines that the independent measurement and calculation of a licensee's canopy is desirable to effectuate the proper assessment or collection of the business license taxes required to be paid under the terms of this Chapter, or for any other purposes related to the express aims of this Article then a canopy measurement shall be performed and a corresponding service fee shall be applicable in the amount as specified by resolution of the City Council.

(C) In the case of commercial cannabis businesses licensed by the state to engage in distribution or manufacturing and that are not occupying the same premises with another cannabis business, the gross number of square feet as confirmed by the corresponding "approved building set" or "approved certificate of occupancy" on file with the City of Santa Ana Planning and Building Agency, whichever is the greater of any square footage indicated.

(D) In the case of commercial cannabis businesses licensed by the state to engage in distribution or manufacturing and occupying the same premises with another cannabis business, the gross number of square feet allocated by the commercial cannabis business owner/operator respectively for either distribution use or for manufacturing use, whether the combined sum of all uses is less than, equal to, or greater than the gross square footage as stated in the "approved building set" or "approved certificate of occupancy."

The number of square feet allocated ("Allocated Square Footage") shall be subject to independent measurement and calculation by duly authorized employees or agents of the City at the time of application for a Santa Ana Business License and annually thereafter at the time of the renewal of such license, or more often as may be deemed necessary in the discretion of the collector. Whenever an independent allocated square footage measurement and calculation is required under the terms of this Article or whenever the collector in his or her discretion determines that the independent measurement and calculation of a licensee's allocated square footage is desirable to effectuate the proper assessment or collection of the business license taxes required to be paid under the terms of this Chapter, or for any other purposes related to the express aims of this Article then an Allocated Square Footage measurement shall be performed and a corresponding service fee shall be applicable in the amount as specified by resolution of the City Council.

(E) In the case of commercial cannabis businesses licensed by the state to engage in testing facilities or testing laboratory businesses, the gross number of square feet comprising such commercial cannabis business' property location as confirmed by the corresponding "approved building set" or "approved certificate of occupancy" on file with the City of Santa Ana Planning and Building Agency, whichever is the greater.

(11) "Manufacturing" as defined in section 40-2(22) of this Code.

(12) "Microbusiness" as defined in section 40-2(24) of this Code.

(13) "Consumption Lounge" as defined in section 40-2(39.1) of this Code.

(14) "Qualified Social Equity Adult-use Cannabis Retail Business" as set out in section 40-16 of this Code. To include: "Socially Equitable Adult-use Cannabis Retail Business (including Delivery and Consumption Lounges)," and "Socially Equitable Adult-use Cannabis Retail Business Temporary Consumption and/or Special Events)."

(15) "Retail business" as defined in section 40-2(39) of this Code.

(16) "Shared manufacturing" as defined in section 40-2(22.5) of this Code.

(17) "Temporary Consumption Event" and "Temporary Consumption Festival" as defined in section 40-2(39.2 and 39.3) of this Code.

(18) "Testing Facility" or "Testing Laboratory" as defined in section 40-2(43) of this Code.

(19) "Wholesale" as defined in section 40-2(44) of this Code.

(k) Modification, repeal or amendment. The City Council may repeal the ordinance codified in this Article, or amend it in a manner which does not result in an increase in the tax or taxes imposed herein, without further voter approval. The City Council may likewise by ordinance adopt and add additional provisions to any other Article of this Chapter and relate them to this Article, or amend any existing provisions of any Article of this Chapter as they may already relate to this Article in any manner which does not result in an increase in the tax or taxes imposed herein, without further voter approval. If the City Council repeals said ordinance or any provision of this Article, it may subsequently reenact it without voter approval, as long as the reenacted ordinance or section does not result in an increase in the tax or taxes imposed herein.

(l) Administration—Rules, regulations and guidelines. In order to aid in the city's collection of taxes due under this Article and to ensure that all commercial cannabis businesses are taxed consistently to the best of the city's ability, the collector, with the concurrence of the city attorney, may promulgate rules, regulations, and guidelines, to implement and administer this Article including, but not limited to, rules, regulations, and guidelines harmonizing other provisions of this Chapter with the provisions of this Article in any manner not inconsistent with the intent of this Article and which does not result in an increase in the tax or taxes imposed herein. The collector may also, with the concurrence of the city attorney, interpret or clarify the methodology of the tax, or any definition applicable to the tax, so long as such interpretation or clarification (even if contrary to some prior interpretation or clarification) is not inconsistent with the language of this Article.

(m) Occasional transactions—Exemptions.

(1) The provisions of this Article shall not apply to persons having no fixed place of business within the city who come into the city for the purpose of transacting a specific item of commercial cannabis business at the request of a specific client or customer, incidental to a commercial cannabis business principally established elsewhere, provided that such person does not come into the city for the purpose of transacting such business on more than three (3) days during any calendar year.

(2) For any person not having a fixed place of business within the city who comes into the city for the purpose of transacting commercial cannabis business activities, the business license tax(es) payable by such person may be apportioned by the collector in accordance with this Chapter.

(n) Reporting and remittance.

(1) Beginning as set forth in subsection (r) below, and monthly thereafter, each commercial cannabis business required to pay a tax or taxes based on gross receipts under this Article (except qualified nonprofit organizations exempt from taxes measured by income or gross receipts), shall report to the city any gross receipts received during the preceding monthly reporting period. In addition, each cannabis business (including qualified nonprofit organizations) required to pay a tax or taxes based on square footage shall report to the city the gross square footage of the cannabis business' property location. Every cannabis business shall then compute the business license taxes at both the gross receipts rate and the gross square footage rate - prorated monthly to one-twelfth ( 1/12 ) of the annual tax rate amount - and shall then remit to the city the amount of the higher of the two (2) tax calculations due and owing during said period in accordance with section 21-133, subsection (d). In the case of a qualified nonprofit organization only the gross square footage computation shall be made and the amount of such calculation shall represent the amount due and owing during said period. All reporting and remitting made shall be done in accordance with instructions from the collector and shall be made using forms provided or approved by the collector.

(2) For purposes of this section, month shall mean calendar month and shall include any fraction of a month. Taxes shall begin to accrue on the date that a person or entity first receives a business license or other city permit to operate as a commercial cannabis business or upon the operative date of this Article should a person or entity already possess a commercial cannabis business license or other city permit to operate as a commercial cannabis business.

(3) The payment of the two thousand dollars ($2,000.00) minimum basic rate gross receipts tax required annually for each separate branch location or separate property location of the business in accordance with this section, shall be made annually prior to the beginning of the fiscal year beginning April first of the current year and expiring on the 31st day of March of the following year. In the case of a new commercial cannabis business the minimum basic rate gross receipts tax shall be paid in advance prior to any new business activity being undertaken. Every new licensee shall pay in advance an amount equal to one-quarter (¼) of the annual minimum basic rate gross receipts tax, for each quarter and fraction of a quarter remaining during the period for which the new license is issued.

(o) Delinquent date—Penalty. Any individual or entity who fails to pay the taxes required by this Article when due shall be subject to penalties and interest as set forth in accordance with this Chapter. The collector is not required to send a delinquency or other notice or bill to any person subject to the provisions of this Article and failure to send such notice or bill shall not affect the validity of any tax or penalty due under the provisions of this Article.

(p) Business license tax certificate/receipt—Required. There are imposed upon all persons engaged in transacting and carrying on any commercial cannabis business activity in the city taxes in the amounts prescribed in this Article. It shall be unlawful for any person, either for him or herself or for any other person, to commence, transact or carry on any business in the city without first having procured a business license from the city under this Chapter and having paid the taxes set forth in this Article, and without complying with any and all applicable provisions contained in this Chapter. The carrying on of any commercial cannabis business activity without complying with all the provisions of this Article shall constitute a separate violation of this Chapter for each and every day that such commercial cannabis activity is so carried on.

(q) Classification of business license assessment type—Term and renewal. The business license issued to commercial cannabis businesses shall be classed as a gross receipts assessment type, issued for the same term of license as set forth in subsection 21-71(c) of this Chapter and shall be subject to renewal in accordance with sections 21-72(c), 21-73(c), and 21-77.

(r) Operative date. Upon the approval by the majority of the voters of the city at the November 6, 2018 general election, the taxes imposed by this Article shall become operative and shall be applied by the collector upon all commercial cannabis businesses.

(s) Operative date of decreased gross receipts tax rate (Testing Facilities or Testing Laboratories). The gross receipts tax set initially at a rate of five (5) percent for testing facilities or testing laboratories pursuant to subsection (d) above shall be decreased to a rate of one (1) percent by resolution of the City Council [Santa Ana City Council Resolution No, 2019-068] as hereinabove provided for in accordance with subsection (c), which reduced rate, under the terms of said City Council resolution, shall become retroactively effective July 1, 2019.

(t) Operative date of decreased gross receipts tax rate (Cultivation, Manufacturing, and Distribution, Adult-use Cannabis Retail Business (including Delivery and Consumption Lounges), Adult-use Cannabis Retail Business (Temporary Consumption and/or Special Events). The gross receipts tax set initially at a rate of six (6) percent for cultivation, manufacturing, and distribution pursuant to subsection (d) above shall be decreased to a rate of one (1) percent, and the gross receipts tax rate set initially at a rate of eight (8) for all adult-use cannabis retail business (including delivery) activities pursuant to subsection (d) above shall be decreased to seven (7) percent to include the sub-activity of consumption lounges, and the ancillary adult-use cannabis retail business (temporary consumption and/or special events) activity; the parallel activities of social equity adult-use cannabis retail business (including delivery and consumption lounge), and the ancillary social equity adult-use cannabis retail business (temporary consumption and/or special events) activity are set at a reduced five (5) percent, by resolution of the City Council [Santa Ana City Council Resolution No, 2022-078] as hereinabove provided for in accordance with subsection (c), which reduced rates, under the terms of said City Council resolution, shall become effective January 1, 2023.

(u) Operative date of decreased square footage tax rate (Cultivation, Manufacturing, Distribution, Adult-use Cannabis Retail Business (Temporary Consumption and/or Special Events), Qualified Social Equity Adult-use Cannabis Retail Business (Temporary Consumption and/or Special Events). The square footage tax set initially at a rate of ten dollars ($10.00) per square foot for cultivation and manufacturing, and four dollars ($4.00) per square foot for distribution pursuant to subsection (d) above shall be decreased to a rate of seven dollars ($7.00) per square foot for cultivation, three dollars ($3.00) per square foot for manufacturing, three dollars ($3.00) per square foot for distribution; and to a rate of zero dollars ($0.00) per square foot for shared manufacturing, adult-use cannabis retail business (temporary consumption and/or special events), and qualified social equity adult-use cannabis retail business (temporary consumption and/or special events) by resolution of the City Council [Santa Ana City Council Resolution No, 2022-078] as hereinabove provided for in accordance with subsection (c), which reduced rates, under the terms of said City Council resolution, shall become effective January 1, 2023.

(v) Notwithstanding the tax rates imposed herein under subsections (d), (s), (t), and (u), the City Council may, in its discretion, at any time solely by resolution, implement any lower or higher tax rate it deems appropriate, not to exceed the maximum rates established by subsection (a).

(Ord. No. NS-2962, § 2(Exh. A-1), 11-6-18; Ord. No. NS-2972, § 7, 9-3-19; Ord. No. NS-2930, § 8, 11-21-17; Ord. No. NS-3026, § 9, 10-4-22, eff. 1-1-23)

Editor's note— Sec. 21-133, subsections (s)—(u), effective January 1, 2023, are hereby adopted by reference and are subject to amendment from time to time by resolution.

(a) The payment of a business tax required by this article, and its acceptance by the city, shall not entitle any person to carry on any commercial 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 commercial 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 commercial cannabis business is in violation of any law.

(b) No tax paid under the provisions of this article shall be construed as authorizing the conduct or continuance of any illegal or unlawful business, or any legal business in an illegal manner, or any business in violation of any ordinance of the city, state or federal law.

(Ord. No. NS-2962, § 2(Exh. A-1), 11-6-18)

Sections 21-7, 21-8, and 21-9 of this chapter notwithstanding, separate city business licenses, issuable to commercial cannabis businesses pursuant to this article, shall be required for each separate type of commercial cannabis business activity transacted and carried on at a single city property location for which a commercial cannabis business may seek licensure by the state, or for which a state license has been approved or issued. Provided, however, that commercial cannabis business activity transacted and carried on at a single city property location for which a commercial cannabis business may seek licensure by the state as a microbusiness, or for which a state license has been approved or issued as a microbusiness, shall in such case be required to obtain a separate city business license business for each of the commercial cannabis activities transacted and carried on.

(Ord. No. NS-2962, § 2(Exh. A-1), 11-6-18; Ord. No. NS-2930, § 8, 11-21-17; Ord. No. NS-3026, § 10, 10-4-22, eff. 1-1-23)

(a) Requirement for Security Deposit. To ensure compliance with business license tax payment requirements established pursuant to this Article, the collector shall require, beginning on the operative date of this Article, that each commercial cannabis business owner/operator, including, but not limited to, each purchaser, assignee, transferee, or other successor in interest (hereinafter collectively referred to as successor) of a commercial cannabis business subject to the business licensing requirements of this Article, deposit one hundred and twenty (120) days following the last day of the month in which business was first commenced such security (per individual business license) in a form acceptable to the collector in an amount not larger than the commercial cannabis business owner's/operator's estimated average monthly business license tax liability as determined by the collector or the sum of ten thousand dollars ($10,000.00), whichever is least. Provided, however, in the event that two or more commercial cannabis business licensees sharing at least eighty (80%) per cent underlying common ownership, regardless of form of business structure, are engaged in an integrated cannabis business (whether vertically or horizontally integrated) as defined in section 21-142, then a single consolidated deposit shall be made equal to the deposit amount owing for the integrated commercial cannabis activity having the highest individual business license tax liability. Each new city commercial cannabis business licensee shall upon obtaining their City business license(s) deposit a similar security as applicable per business license within thirty (30) days after commencing business.

(b) Extension of Time. If, upon request and in the judgment of the collector, a determination of any commercial cannabis business' estimated average monthly tax liability for purposes of setting the amount of their required security deposit requires an extension of time beyond one hundred and twenty (120) days following the last day of the month in which business was first commenced, then the collector may issue a written notification to such commercial cannabis business granting such extension.

(c) Application of Security Deposit. To recover past-due business license taxes, including penalties, interest, charges, fees, or costs (hereinafter collectively referred to as business license tax liabilities) remittable by the depositor, the collector may apply the security deposited with the collector. At least fifteen (15) days prior to the application of a security deposit, the collector shall serve upon the depositing commercial cannabis business owner/operator notice of intent to apply the security deposit. Service of notice may be made by placing the notice in the United States mail, postage prepaid, addressed to the depositing commercial cannabis business owner/operator at their place of business or other mailing address of record. Any portion of the security remaining after satisfaction of outstanding business license tax liabilities and any expenses related to third-party administrative charges or fees relating to the liquidation and application of non-cash deposits may be retained by the collector for security or in the case of a closeout audit may be paid over by the collector to the depositing owner/operator. Except in the case of a closeout audit pursuant to section 21-141, in the event the collector applies the security deposit, or any portion of said deposit, as an offset against remittable business license tax liabilities and any expenses related to third-party administrative charges or fees relating to the liquidation and application of non-cash deposits, the commercial cannabis business owner/operator shall be required within thirty (30) days of the collector's written demand therefor, to re-deposit the full amount of the required security. In such event the amount of the required security shall be adjusted by the collector based on the average of the commercial cannabis business' actual monthly gross receipts tax returns and/or remittances as measured over the last three (3) valid monthly returns and/or remittances received by the collector or the sum of ten thousand dollars ($10,000), whichever is least, less any amount remaining on deposit with the collector. Service of demand shall be in the same manner as stated hereinabove for service of notice.

(d) Failure to Post or Restore Security Deposit—Effect. Failure by a commercial cannabis business licensee to initially post or restore a security deposit when required by the collector pursuant to this section shall be cause for suspension and/or revocation of such commercial cannabis business' existing Santa Ana Business License as set out in section 21-86 of this Chapter. Similarly, in the case of a vertically and/or horizontally integrated cannabis business, the business license(s) of the integrated commercial cannabis business(es) shall be likewise subject to suspension and/or revocation.

(e) Jeopardy Determination. If the collector believes that the collection of any business license tax imposed by this Article will be jeopardized, in whole or in part, by delay in the commercial cannabis business owner's/operator's timely remittance of the business license tax, the collector shall serve notice upon the person determined to be liable therefor of their determination of jeopardy and of the business license tax required to be paid to the City, and demand immediate payment thereof, together with any interest and penalty determined to be due. The collector may consider all facts and circumstances relevant to determining whether the collection of any business license tax will be jeopardized by delay, including, but not limited to, indications that the person liable for the business license tax intends to take or is taking action to discontinue business activities in the City, dissipate or otherwise remove assets from the City, or sell, exchange, transfer, assign, or otherwise dispose of such person's business, personal or business income, or business property. The collector also may consider whether the person liable for the business license tax is or has been uncooperative or unresponsive in connection with any investigation, examination, audit, deficiency determination, assessment, or collection action or procedure undertaken by the collector. A jeopardy determination of business license tax, penalty, or interest, is immediately due and payable upon the service of the notice of jeopardy determination on the person determined to be liable therefor. Service of notice of a jeopardy determination shall be made by: (1) sending the notice initially by electronic mail to the depositing commercial cannabis business owner's/operator's electronic mail address of record as set out in the depositing commercial cannabis business owner's/operator's application for business license or most recent business license renewal affidavit or business license amendment statement; (2) placing the notice for delivery with an express carrier for next business day delivery, all delivery and tracking charges prepaid, addressed to the depositing commercial cannabis business owner/operator at their place of business; and/or (3) conspicuously posting said notice upon the premises of the commercial cannabis business. Service of notice of a jeopardy determination shall be deemed completed upon tracking confirmation of the delivery of said notice to the commercial cannabis business owner's/operator's place of business or on the date of the actual posting of said notice on the premises of the depositing commercial cannabis business owner/operator. Upon the business day next following the completion of service of notice of a jeopardy determination upon a depositing commercial cannabis business, the collector in his or her discretion may proceed with the application of the security deposit upon actual or estimated business license taxes due, including penalties, interest, charges, or service fees.

(f) Refund or release of security deposit. In the case of the sale, assignment, or other transfer or termination of business by the depositor pursuant to section 21-141, the collector shall refund or release the security deposit amount required pursuant to this section, or in the event of prior application of the security deposit pursuant to subsection (c), any unapplied amount of such security deposit, upon depositor's presentation to the collector of a certificate of nonliability stating the nonliability of the depositor for payment of business license taxes as hereunder provided in section 21-141(f).

(g) Deposit adjustment—Effect. In the case of a determination by the collector that the amount of a previously posted commercial cannabis business owner's/operator's security deposit exceeds the requirements of this section, then the collector shall adjust the amount of the required security deposit. If the prior security deposit was posted on a cash basis, then the collector shall refund the excess amount. If the prior security deposit was posted on a non-cash basis, then an adjusted cash basis security deposit or adjusted non-cash basis security deposit in a form acceptable to the collector may be posted in exchange for the release of the prior security deposit.

(Ord. No. NS-2962, § 2(Exh. A-1), 11-6-18)

Unless specifically provided otherwise, any reference to a state or federal statute in this article or chapter (whether by direct citation or by definitional reference to another chapter of this code) 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 subsequent amendment thereto, or to any subsequent 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 require voter approval under California law, or to the extent that such change would result in a tax decrease. Only 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.

To the extent that the city's authorization to collect or impose any tax imposed under this article is expanded or limited as a result of changes in state or federal law, no amendment or modification of this article 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 article.

(Ord. No. NS-2962, § 2(Exh. A-1), 11-6-18)

Any person violating any of the provisions of this article or any regulation or rule passed in accordance herewith, shall be deemed guilty of a misdemeanor, and upon conviction thereof shall be punishable by the maximum penalties provided for in California Penal Code Section 19. The penalties under this section are in addition to any other penalties available pursuant to this code.

(Ord. No. NS-2962, § 2(Exh. A-1), 11-6-18)

Section 21-67 of this chapter notwithstanding, business licenses issued to commercial cannabis businesses pursuant to this article shall be transferable or assignable upon presentation of a valid regulatory safety permit issued in the name of the transferee or assignee.

(Ord. No. NS-2962, § 2(Exh. A-1), 11-6-18)

Should any provision of this article, 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 article or chapter or the application of this article or chapter to any other person or circumstance and, to that end, the provisions hereof are severable.

(Ord. No. NS-2962, § 2(Exh. A-1), 11-6-18)

(a) Owner/Operator's duty to notify.

i. Termination of business. A commercial cannabis business owner/operator who is terminating their business shall notify the collector in writing of such termination at least ninety (90) days in advance of the date of termination of business. If the decision to terminate business is made within less than a ninety (90) day period prior to the date of termination, the owner/operator shall then immediately notify the collector of said decision and the date of termination of business.

ii. Sale, assignment, or transfer of business. A commercial cannabis business owner/operator who is selling, assigning, or otherwise transferring their business (hereinafter collectively referred to as transferor) shall notify the collector in writing of such sale, assignment, or transfer at least ninety (90) days in advance of the date of the sale, assignment, or transfer and shall notify the collector in writing of the name and address of the purchaser, assignee, transferee, or other successor in interest (hereinafter collectively referred to as successor) unless the decision to sell, assign, or otherwise transfer their business was made within less than a ninety (90) day period prior to the sale, assignment, or transfer, in which case the transferor shall then immediately notify the successor of the successor's responsibility for unpaid business license taxes, including penalties, interest, charges, fees, or costs (hereinafter collectively referred to as business license tax liabilities) for the period prior to the sale, assignment, or transfer as set forth in subsections (d) and (e) below, and shall further certify in writing to the collector that the successor was notified of the requirements of this Article regarding their responsibility for unpaid business license tax liabilities.

(b) Remitting and reporting requirements. Each commercial cannabis business owner/operator upon the sale, assignment, or other transfer, or termination of business for any reason shall, on or before the last day of the month following the sale, assignment, transfer, or termination of business, file a final return to the collector on City approved forms, of the total gross receipts received, adjustments to gross receipts, the amount of business license tax collected for the reporting period, remittances made, if any, and the balance of the business license tax due, if any, shall be remitted to the collector.

(c) Closeout audit. After filing the final return and remitting the balance due, the commercial cannabis business owner/operator shall make its records of account available for a closeout audit by the collector, his or her revenue officers, or duly authorized employees or agents of the City. The decision to perform a closeout audit shall be made solely at the discretion of the collector. If, upon closeout audit, or by means of other information available to them, the collector determines that the owner/operator selling, assigning, or otherwise transferring, or terminating their business is found to have satisfied all business license tax liabilities, the collector shall issue to such business owner/operator a certificate of nonliability.

If, upon closeout audit, or by means of other information available to them, the collector determines that the owner/operator selling, assigning, or otherwise transferring, or terminating their business is deficient in either their return or remittance, or both, the collector shall immediately notify such owner/operator of the amount of the net deficiency, plus applicable penalties, interest, charges, fees, or costs. Upon such owner/operator's remittance of all business license tax liabilities owing, the collector shall issue a certificate of nonliability.

(d) Successor's duty to notify. If a commercial cannabis business owner/operator decides to sell, assign, or otherwise transfer their business, their successor shall notify the collector of the date of the sale, assignment, or other transfer at least ninety (90) days before the date of the sale, assignment, or transfer. It shall be the duty of the successor to obtain written verification from the collector's office that the transferor does not have or is not liable for any outstanding business license taxes liabilities. After the successor seeks written verification from the collector's office, if the collector notifies the successor that the transferor has or is liable for any outstanding amount of business license tax liabilities, the successor shall withhold an amount equal to such outstanding business license tax liabilities until the transferor produces a certificate of nonliability stating the nonliability of the transferor for payment of business license tax liabilities. If the transferor does not present a certificate of nonliability within ninety (90) days after such sale, assignment, or other transfer, the successor shall deposit the withheld amount with the collector pending settlement of the account of the transferor.

If the decision to sell, assign, or otherwise transfer was made within less than a ninety (90) day period prior to the date of the sale, assignment, or other transfer, the successor shall notify the collector of the sale, assignment, or transfer immediately and shall withhold an amount equal to the sum of the transferor's last three (3) months' of reported and remitted business license taxes until the transferor produces a certificate of nonliability stating the nonliability of the transferor for payment of business license tax liabilities. If the transferor does not present a certificate of nonliability within ninety (90) days after such sale, assignment or other transfer, the successor shall deposit the withheld amount with the collector pending settlement of the account of the transferor.

(e) Joint and several liability. If the successor fails to withhold the applicable amount required under subsection (d) they shall become jointly and severally liable along with the transferor for the payment of the full amount of the transferor's business license tax liabilities and shall likewise become jointly and severally liable along with the transferor for future penalties and/or interest charges as may be applicable as set forth in sections 21-83, 21-84, and 21-85 until all business license tax liabilities are satisfied.

(f) Certificate of nonliability. Upon application of a commercial cannabis business owner/operator who is terminating their business, or a transferor, or a successor, for a certificate of nonliability, the collector, after conducting an audit therefore, as he or she may deem necessary, shall issue the certificate of nonliability if the owner/operator's, transferor's, or successor's business license tax liabilities have been satisfied. If any business license tax liabilities remain outstanding, or if additional business license tax liabilities have accrued subsequent to the date of application, the collector shall give notice to the operator/owner, transferor, or successor of the applicable amount which must be fully paid as a condition of issuing their respective certificate of nonliability. Where a transferor's business license tax liabilities have been partially or wholly paid by their successor to the collector pursuant to subsection (e) or partially or wholly satisfied by their successor's action of withholding and depositing amounts with the collector pursuant to subsection (d), no certificate of nonliability shall be issued to the transferor without the prior written consent of their successor.

(Ord. No. NS-2972, § 9, 9-3-19)

The terms vertical integration and horizontal integration as used in this Article shall have the following meanings: Vertical integration shall refer to cannabis businesses operating at different points in the same supply chain from cultivation to retail sales, as long as they share at least eighty (80%) per cent underlying common ownership, regardless of form of business structure, and are engaged in interparty sales and/or transfers of goods. Horizontal integration shall refer to cannabis businesses operating at the same point in the same supply chain, as long as they share at least eighty (80%) per cent underlying common ownership, regardless of form of business structure, and are engaged in interparty sales and/or transfers of goods. For purposes of this Article the term "cannabis businesses" shall include medicinal marijuana collectives/cooperatives as defined in section 18-611 and commercial cannabis businesses as defined in section 40-2, but shall not include commercial cannabis businesses engaged in testing facilities or testing laboratory businesses.

(Ord. No. NS-2972, § 10, 9-3-19)