I. RECOMMENDATION:
Receive the consultant-prepared information regarding retail cannabis sales tax rates among similar nearby jurisdictions and provide direction to staff on whether the City Council wishes to maintain the City’s current retail cannabis tax rate or explore adjustments to the rate.
II. BACKGROUND:
The City of Coalinga currently imposes a local retail cannabis sales tax of 10 percent on gross receipts. As part of ongoing fiscal review and economic development planning, the City requested its consultants to prepare a comparative review of retail cannabis tax rates across peer and regional California jurisdictions.
The purpose of this review is to provide City Council with information needed to evaluate whether the City’s existing tax rate remains appropriate in relation to market conditions, regional competitiveness, and long-term revenue considerations.
III. DISCUSSION:
The consultant analysis reviewed retail cannabis sales tax rates across eighteen peer and regional California cities. The results show that retail cannabis tax rates among the surveyed jurisdictions range from 2 percent to 10 percent of gross receipts.
Coalinga’s current rate of 10 percent places the City at the top of the peer range and ties it for the highest rate among the cities reviewed. Approximately one-third of the surveyed cities impose a 10 percent rate, while the majority of jurisdictions have adopted lower rates.
The median retail cannabis tax rate among the peer group is 7.5 percent, and the average rate is approximately 7.15 percent. Several nearby or comparable jurisdictions impose lower rates, including Fresno at 4 percent, Hanford at 6 percent, Lemoore at 5 percent, and Madera at 2 percent.
While Coalinga’s geographic location may reduce the likelihood of frequent cross-jurisdiction purchasing, higher local tax rates can still affect retail pricing, operator margins, and long-term market sustainability. The consultants noted that lower tax rates may reduce revenue per dollar of sales but can improve competitiveness, compliance, and overall market participation. In other cases increased sales could result as costs decrease for the customers.
IV. ALTERNATIVES:
- Maintain the existing 10 percent retail cannabis sales tax rate.
- Whether to direct staff to evaluate and return with options for adjusting the tax rate, such as reducing the rate to better align with peer and regional averages.
- Whether to defer any changes and revisit the tax rate following additional market data, revenue trends, or future review periods.
V. FISCAL IMPACT:
Need to asses if the rate in reduced what the reduction in tax revenue would be. |