HomeMy WebLinkAboutProposed City Council Sponsored Initiative Regarding Cannabi 2000 Main Street.
AWL Huntington Beach,CA
92648
City of Huntington Beach Arre-vveD 15
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File #: 22-162 MEETING DATE: 3/1/2022
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Sean Joyce, Interim City Manager
PREPARED BY: Travis K. Hopkins, Assistant City Manager
Subject:
Proposed City Council Sponsored Initiative Regarding Cannabis Business Tax
Statement of Issue:
In 1996, California voters adopted Proposition 215, known as the Compassionate Use Act ("CUA"),
which enabled persons to purchase and used marijuana for legitimate medical purposes under
limited, specific circumstances. In 2004, the Medical Marijuana Program Act ("MMPA") was enacted,
providing certain legal protections to qualifying patients and primary caregivers who collectively or
cooperatively cultivate marijuana for medical purposes.
In 2015, the State Legislature again acted to adopt laws further legalizing marijuana/cannabis-related
business activities in what is known as the Medical Marijuana Regulation and Safety Act ("MMRSA").
MMRSA generally requires all individuals who are engaged in "commercial cannabis
activities" (defined to include cultivators, manufacturers, testers, dispensaries, distributers, and
transporters) to obtain both a State license and local permit (if one is required) prior to commencing
operations. While State agencies have since adopted regulations relating to medical and commercial
cannabis (e.g., labeling and production of edibles, use of pesticides, environmental impacts of
cultivation, and cumulative impacts of water diversion), those regulations and the MMRSA only
established minimum statewide standards relating to commercial cannabis activities.
In 2016, the City adopted two ordinances banning all medical and recreational cannabis/marijuana
related activities. In November 2016, California voters approved Proposition 64 - The Control,
Regulate and Tax Adult Use of Marijuana Act, legalizing recreational adult-use of cannabis in
California for individuals 21 years age and older. The measure took immediate effect. Prop 64
created the Bureau of Cannabis Control, as well as the issuance of new regulations from existing
State Departments (such as the Department of Consumer Affairs) to deal with the growing
cannabis/marijuana industry since roughly January 2018 . Since that time, many California cities
allowed cannabis- related businesses to operate, pursuant to the respective municipal codes and
taxed said businesses. Locally, 53% of Huntington Beach registered voters who cast ballots in that
election supported Prop 64. In 2017, the Medicinal and Adult-Use Cannabis Regulation and Safety
Act (MAUCRSA) was adopted to create a more comprehensive regulatory structure for all
commercial cannabis activities.
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Despite legalization of cannabis-related businesses through the CUA, the MMPA, and Prop 64. the
manufacturing, distribution, and sale of marijuana/cannabis remains unlawful in Huntington Beach. In
addition, the Federal Controlled Substance Act (21 U.S.C. `§ 812, 841, 844) prohibits on a national
level the manufacturing, distribution, and sale of marijuana.
Since the passage of these new statewide marijuana/cannabis laws, the State and municipalities
have developed regulations and licensing structures to regulate cultivation, manufacturing,
distribution, and sales. Though cannabis-related businesses are prohibited in Huntington Beach, the
City Council (or voters through an initiative) could permit the taxation and regulation of such
businesses. Notably, only voters can approve new taxes.
Proponents in favor of allowing commercial cannabis activity in the City have submitted a Notice of
Intention to circulate an initiative measure to the City Clerk's office, proposing legalization, taxation
and regulation of commercial cannabis businesses in the City. The initiative measure with its
attendant regulatory structure was created without City Council or staff input.
At a December 21, 2021 Cannabis Study Session the City Council's general direction was that the
City should position itself to establish its own law to regulate commercial cannabis activities in the
City. The City Council created an ad-hoc subcommittee consisting of Councilmembers Rhonda
Bolton, Dan Kalmick, and Erik Peterson to discuss this matter further and come back to the City
Council with recommendations.
Financial Impact:
Per the Orange County Registrar of Voters, the cost to add one (1) measure on the June 7, 2022
Primary Election ballot is approximately $317.000 to $450,000. This cost is based primarily on the
number of registered voters, of which there are approximately 133,000 in Huntington Beach.
Narrowing the range to a final cost will depend on a few other factors including: the total number of
entities placing items on the ballot and thereby sharing in certain election costs; the number of ballot
pages required for the City's measure at approximately $8,500 for every 2 pages; and expenses such
as postage, printing, and other forms of cost recovery.
It should be noted that adding a second measure on the June ballot does not double the total election
cost. Rather the cost for the second measure is limited to the cost for the number of ballot pages
required.
As a matter of comparison, if the City Council forgoes the June 2022 Primary Election and places a
ballot measure on the November 2022 General Election, which the City has previously committed to
participating in for the upcoming City Council and City Attorney elections, the cost of that measure
would be approximately 525,500 based on the estimated six pages required.
If cannabis-related businesses were to be permitted, it is difficult to estimate the tax revenue that
would be generated for the City as it can vary greatly depending on the number and type of
businesses permitted by the City. However, based on a 2019 report of HdL Company, it is estimated
that permitting and taxing a limited number of cannabis-related businesses, including retailers, could
generate roughly $300,000 to $600,000 in tax revenue annually.
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It is the subcommittee's recommendation to establish fees for 100% cost recovery of city expenses,
which can be estimated by staff and approved annually by the City Council via resolution. However,
it should be noted that the City will likely incur additional costs associated with administering the tax
and regulating cannabis activities such as police, code enforcement, business support and oversight
of the program to name a few. Such costs are undetermined at this time.
Recommended Action:
If the City Council wishes to put a tax ballot measure before voters in June as a special tax, the
following actions are recommended:
A) Adopt Resolution No. 2022-07, "A Resolution of the City Council of the City of Huntington Beach,
B) Direct staff to schedule a future meeting date at which the City Council can further consider
the implications of various unresolved policy/regulatory matters associated with cannabis, after
which time the City Attorney can prepare and return to the City Council for its consideration, a
regulatory ordinance regarding cannabis regulations for City Council adoption or voter approval; and
C) Authorize a General Fund appropriation of up to $450,000 in Account 10010201.69505 for
the OC Registrar of Voters to cover all associated election costs related to placing the measure on
the June 7, 2022 ballot.
However, if the City Council wishes to put a tax measure before voters in November as a general
tax, the following actions are recommended:
1) Direct staff to return to the City Council to adopt the draft resolution (Attachment 2); and,
2) Direct staff to schedule a future meeting date at which the City Council can further consider
the implications of various unresolved policy/regulatory matters associated with cannabis, after
which time the City Attorney can prepare and return to the City Council for its consideration, a
regulatory ordinance regarding cannabis regulations for City Council adoption or voter approval.
If this option is selected, the cost of election will be budgeted in the FY2022-23 budget.
Alternative Action(s):
As directed by the City Council. It is noted, however, that the City Council must adopt a resolution
associated with the June 7, 2022 ballot on or before March 11, 2022.
Analysis:
Special Tax vs. General Tax
Special Tax
If the Council decides to place a cannabis-related tax measure on the June 7, 2022 Primary Election
ballot, the measure must be consolidated with the Primary election and can only be conveyed to the
voters as a special tax. A special tax must be approved by 2/3 of voters, and if successful, could
provide an indicator as to the citizen's interest in allowing cannabis in the City. In addition, if the
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Measure passes and cannabis-related businesses become legal in Huntington Beach, a tax will
already be in place to capture City revenue.
As discussed, if the Measure goes forward as a special tax measure on the June Primary election, a
2/3 vote of the electorate is required and the tax revenue must be deposited into a separate fund (not
the General Fund), the Chief Finance Officer must report annually the statue of the fund and the
funds may only be used for specified purposes. For Council consideration, staff proposes the
following areas to direct the revenue:
• Police services for public safety and security, and
• Behavioral health and homeless prevention and intervention programs and services including
but not limited to the City's homeless task force efforts, Navigation Center operation, and Be
Well Crisis Mobile Program.
Council must adopt a Resolution (Attachment 1) on or before March 11 . 2022 in order to consolidate
the City election with the Statewide Primary.
General Tax
If the Council places the measure on the November ballot instead, the measure can be a general tax
and proceeds can go to the general fund for any general municipal services. The additional cost of
this ballot measure on the General Election would be approximately $8,500 for the measure (every 2
pages), since the City is already participating for the upcoming City Council elections.
Government Code section 53724, requires the resolution calling for a general tax to be placed on a
general municipal election be adopted by 2/3 of the Legislative Body.
Proposed Tax Rates
A survey of several California cities and counties reveals a wide variety of cannabis tax structures. It
should be noted that the City's cannabis tax will be addition to the State's 15% excise tax and 7.75%
sales taxes, making the cumulative tax rate to range from 25-30%.
Some jurisdictions provide non-to-exceed cannabis tax rates, with the governing bodies having the
option to adjust within a range of business tax rates. Many apply the lower rates to non-retailers such
as manufacturing and testing labs, than retailers.
The proposed tax rates by Staff and the Subcommittee are:
• Up to 1% for non-retailers (indoor cultivation, manufacturing, testing laboratory, and
distribution) and;
• Up to 6% for retailers (both storefront and delivery) and;
• Allowing flexibility for the City Council to adjust tax rates between minimum and maximum
voter-approved rates for each type of cannabis businesses to address yet unpredictable,
emerging economic conditions.
Cannabis Tax Ballot Measure
The proposal included in the Ordinance combines business tax rate and implementation concepts
from the other agencies surveyed, but is premised on ensuring that all cannabis-related businesses
contribute tax revenue to the community. The proposed ordinance establishes tax rates regardless of
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City actions that may be taken in the future regarding allowing cannabis-related businesses to
operate via changes to land use regulations.
In addition to establishing tax rates, the attached Resolution (Attachment 1) includes a proposed
ballot question, deadline to submit direct (3/11/2022) and rebuttal (3/21/2022) arguments, and it
directs the City Attorney to draft and submit an impartial analysis of the measure by MARCH, 11,
2022.
Council as a whole, or any member of members authorized by the City Council may submit ballot
arguments, for or against the measure pursuant to Elections Code section 9281 and 9282. If the
motion moves forward, the Council should consider adopting a motion designating a subcommittee to
draft an argument on its behalf, or designating specific Council Members to draft an argument under
their names. In the event such a Council authorized argument is not prepared, individual voters
(including Council Members) can submit an argument, and a priority is set forth by Election Code
Section 9287 to be applied by the City Clerk in selecting the ballot argument to use (only one may be
used.)
Environmental Status:
Adoption of the proposed ordinance is exempt under the California Environmental Quality Act
pursuant to Business & Profession Code section 26055(h), and Sections 15061(b)(3) and 15378(b)
of Title 14 of the California Code of Regulations, because there is no possibility that it could have a
potentially significant effect on the environment.
Strategic Plan Goal:
Homelessness Response
Attachment(s):
1 . Resolution 2022-07 and Ordinance for Special Election
2. DRAFT Resolution 2022-XX and Ordinance for General Election
3. Memo from Cannabis Ad hoc subcommittee Members Bolton and Kalmick attached at their
request
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City Council/ ACTION AGENDA March 1, 2022
Public Financing Authority
21. 22-153 Adopted Ordinance No. 4234 approving Zoning Text Amendment (ZTA) No.
21-006 establishing electric vehicle charging station sign standards
Approved for introduction Feb. 15, 2022 - Vote: 7-0
Recommended Action:
Adopt City Council Ordinance No 4234. An Ordinance of the City of Huntington Beach
Amending Chapter 233 of the Huntington Beach Zoning and Subdivision Ordinance Establishing
Electric Vehicle Charging Station Sign Standards (Zoning Text Amendment No 21-006)."
Approved 7-0
ADMINISTRATIVE ITEMS
22. 22-123 Approved Withdrawal of Previous City Council Approval of the Edison
Park Reconfiguration Conceptual Plan, and conduct further outreach,
review and analysis of the Plan
Recommended Action:
A) Withdraw the November 16, 2021 City Council approval of the final Edison Park Reconfiguration
Conceptual Plan, and.
B) Direct staff to conduct further community outreach and additional review and analysis of the
Conceptual Plan. and return to City Council
Approved 7-0
23. -141 Approved and authorized a First Amendment to the Exclusive Negotiating
Agreement (ENA) with Surf City Partners. LLC for 21 Main Street at the
Huntington Beach Pier
Recommended Action:
Approve and authorize the Mayor and City Clerk to execute the "First Amendment Exclusive
Negotiating Agreement Between City of Huntington Beach and Surf City Partners. LLC" to expand
the property area to include the pier restroom building and surrounding area as part of the 21
Main Street property description
Approved 6-1 (Peterson-No)
24. 22-162 Approved proposed City Council Sponsored Initiative Regarding
Cannabis Business Tax
Recommended Action:
If the City Council wishes to put a tax ballot measure before voters in June as a special tax, the
following actions are recommended
A) adopt Resolution No 2022-07, "A Resolution of the City Council of the City of Huntington
Beach. California calling for a Special Election to place a special tax measure on the June 7.
2022 Statewide Primary election ballot for the submission to the qualified voters of proposed
Ordinance No 22-XX adding Chapter 3.25 to Title 3 of the Huntington Beach Municipal Code.
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City Council/ ACTION AGENDA March 1, 2022
Public Financing Authority
establishing a tax on cannabis businesses within the City of Huntington Beach, requesting full
election services from the County of Orange to conduct said election, and setting rules and
deadlines for arguments and rebuttals for and against the Ordinance including designating council
to draft arguments and
B) Direct staff to schedule a future meeting date at which the City Council can further consider
the implications of various unresolved policy/regulatory matters associated with cannabis after
which time the City Attorney can prepare and return to the City Council for its consideration. a
regulatory ordinance regarding cannabis regulations for City Council adoption or voter approval.
and
C) Authorize a General Fund appropriation of up to $450,000 in Account 10010201 69505 for
the OC Registrar of Voters to cover all associated election costs related to placing the measure
on the June 7 2022 ballot.
However, 4 he 6ityr6eunc�✓ wishes to put
4 ikHs Opt OR 16 6eleGiled the Gast of elekGt on vo 11 be budgeted IR the,F-Y2A22-2abudget
Approved 5-2 (Peterson, Posey-No) adoption of Resolution No. 2022-07 and related
actions as presented; authorized Councilmembers Bolton, Carr and Kalmick to submit
a written argument in favor of the proposed measure for inclusion on the June 6, 2022
Statewide Primary ballot
ORDINANCES FOR ADOPTION
25. 22.092 Adapted Interim Urgency Ordinance No. 4249 amending the Huntington
Beach Zoning and Subdivision Ordinance to establish objective standards
for urban lot splits and housing units constructed in accordance with Senate
Bill 9
SIX AFFIRMATIVE VOTES ARE REQUIRED TO ADOPT THIS ORDINANCE PER
GOVERNMENT CODE SECTION 65858
Recommended Action:
Adopt Urgency Ordinance No 4249. "An Interim Ordinance of the City Council of the City of
Huntington Beach Adding Chapter 237 to Title 23 of the Huntington Beach Zoning and
Subdivision Ordinance to Provide Objective Standards for Urban Lot Splits and Housing Units
Built in Accordance with Senate Bill 9. Declaring the Urgency Thereof. and Making a Finding of
Exemption Under CEQA "
Approved 7-0
Page 6 of 8
•�_ CITY OF HUNTINGTON BEACH
Inter-Office Memo
TO: Robin Estanislau, City Clerk
FROM: Travis Hopkins, Assistant City Mana r
CC: Michael Vigliotta, Chief Assistant City Attorney
DATE Feburary 28, 2022
SUBJECT: Supplemental to City Council Item # 22-162
For the City Council meeting on March 1, 2022, we are transmitting an updated version of
the Resolution No. 2022-07 (attachment 1) and Draft Resolution and Ordinance
(attachment 2) regarding the Agenda Item # 22-162.
There are no substantial changes, except minor grammatical edits.
Should you have any questions, please contact our office. The original copies will be sent
to you shortly before the Council meeting. Thank you so much.
Attachments:
1 . Resolution No. 2022-07
2. DRAFT Resolution and Ordinance
SUPPLEMENTAL
COMMUNICATION
Meeting Data: '3//1"?Z
Agenda Item No_ o?11lo?_7 - /&-:;L
RESOLUTION N0. 2022-07
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH
CALLING FOR A MUNICIPAL ELECTION FOR THE PURPOSE OF SUBMITTING TO
THE VOTERS OF THE CITY OF HUNTINGTON BEACH A PROPOSED ORDINANCE
ADDING CHAPTER 3.25 TO TITLE 3 OF THE HUNTINGTON BEACH MUNICIPAL
CODE, ESTABLISHING A SPECIAL TAX ON CANNABIS BUSINESSES OPER.AThNG
WITHIN THE CITY OF HUNTINGTON BEACH; REQUESTING CONSOLIDATION OF
THIS ELECTION WITH THE JUNE 7. 2022 STATEWIDE PRIMARY ELECTION AND
REQUESTING ELECTION SERVICES FROM THE COUNTY OF ORANGE TO
CONDUCT SAID ELECTION: AND SETTING RULES AND DEADLINES FOR
ARGUMENTS AND REBUTTALS FOR AND AGAINST THE ORDINANCE.
WHEREAS, pursuant to California Government Code Sections 37100.5 and 37101, the
City of Huntington Beach has the authority to establish a local business tax upon Cannabis
Businesses that engage in business in the City; and
WHEREAS, pursuant to Section 9222 of the California Elections Code, the City
Council has authority to place propositions on the ballot to be considered at the Special
Municipal Election; and
WHEREAS, the City Council desires to submit to the voters an ordinance establishing
both (i) a not to exceed rate of 6% local special tax on the Gross Receipts received by any
Cannabis retail business; and (ii) a not-to-exceed rate of 1% local special tax on any other
Cannabis Business, including but not limited to Indoor Cultivation, Manufacturing, Testing
Laboratory, and Distribution: and
WHEREAS, the proposed Cannabis Business Tax is a special tax, the proceeds of
which would be deposited into the City special fund for police services for public safety, and
behavioral health and homeless prevention, and intervention programs and services; and
WHEREAS, on November 6, 1996, the voters of the State of California approved
Proposition 218 (California Constitution, Article XIIIC), an amendment to the State
Constitution that requires that all special taxes imposed, extended or increased by the City
must be submitted to the electorate and approved by a 2/3 vote of the qualified electors voting
in the election; and
WHEREAS, the proposed ordinance would establish a special tax which is subject to
Proposition 218-, and
WHEREAS, pursuant to Proposition 218 (California Constitution Article XIIIC),
§2(b)), the general rule is a special tax may be consolidated with a regularly scheduled primary
election: and
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RESOLUTION NO. 2022-07
WHEREAS, the next regularly-scheduled Statewide primary election is set for June 7,
2022; and
WHEREAS, the City Council also desires to request that the Orange County Registrar
of Voters provide full election services to the City in order to conduct a Special Municipal
Election for the Ordinance/Measure described herein to be held and consolidated with the
Statewide Primary Election on June 7. 2022: and
WHEREAS. the City Council also desires to establish deadlines and rules for the
submission of Nvritten arguments and rebuttals for and against the Ordinance in accordance
with applicable California Elections Code procedures; and
WHEREAS, the specific terms relating to the Cannabis Business Tax are provided for
in the ordinance to be considered by the qualified voters, attached hereto as Exhibit I (the
"Ordinance" or "Measure") and by this reference made an operative part hereof, in accordance
with all applicable laws.
NO\V, THEREFORE'-, THE CITY COUNCIL OF THE CITY OF HUN"fINGTON
BEACH, CALIFORNIA, DOES RESOLVE, DECLARE, DETE"RIN4INE, AND ORDER AS
FOLLOWS:
SECTION 1. Recitals. The City Council hereby finds and determines that the foregoing
recitals are true and correct, are incorporated herein, and by this reference made an operative
part thereof.
SECTION 2. Submission of Ballot Measure. The City Council of the City pursuant to its
right and authority as contained in Government Code Section 37100.5 and Elections Code
Section 9222 and consistent with the requirements of California Proposition 218 hereby orders
the Ordinance attached hereto as Exhibit 1 be submitted to the qualified voters of the City at
the Statewide Primary Election to be held on June 7, 2022. The proposed Ordinance shall be
in the form attached hereto as Exhibit 1 to this Resolution and incorporated by this reference as
if fully set forth herein.
SECTION 3. Ballot Measure. The City Council, pursuant to its right and authority, does
hereby order that the Measure shall be presented and printed upon the ballot submitted to the
qualified voters in the manner and form set forth in this Section 3. On the ballot to be
submitted to the qualified voters at the Statewide Primary Election to be held on June 7, 2022,
in addition to any other matters required by law, there shall be printed substantially the
following:
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RESOLUTION NO. 2022-07
Measure_: The City of Fluntington Beach Cannabis Business Tax Measure
Shall the City adopt a special tax measure of up to 6% of gross
receipts on Cannabis retailers and up to 1% of gross receipts on all YES
other Cannabis businesses, which is expected to generate an estimated
S300.000 to S600,000 annually for the specific purposes of funding
police, homeless prevention, behavioral health services, and
intervention programs, and levied until terminated by voters? NO
SECTION 4. Election Procedures.
A. The ballots to be used at the election shall be in the form and content as required by
law.
B. In accordance with Section 10403 of the Elections Code, the Board of Supervisors of
Orange County is hereby requested to consent to the consolidation of a Special
Mtmicipal Election with the Statewide Primary Election on June 7, 2022, with the
election to be held and conducted in the manner prescribed by Election Code Section
10418 for the purpose of submitting to the voters of the City of Huntington Beach a
question relating to the adoption of the proposed ordinance.
C. In addition, in accordance with Section 10002 of the Elections Code, the Board of
Supervisors, is hereby requested to consent to having the County Election
Department/Registrar of Voters render full election services to the City of Huntington
Beach as may be requested by the City Clerk of said City, with the County of Orange
to be reimbursed in full for services as are performed.
D. The full election services which the City of Huntington Beach requests the Registrar of
Voters, or such other official as may be appropriate, to perform and which such officer
is hereby authorized and directed to perform if said Board of Supervisors consents,
include the preparation, printing and mailing of sample ballots. the establishment or
appointment of vote centers. and election officers, the preparation, printing; mailing
and famishing of vote-by-mail ballots, making such publications as are required by law
in connection therewith; the furnishing of ballots, voting booths and other necessary
supplies or materials for polling places; the canvassing to the City Clerk of the City of
Huntington Beach; and the performance of such other election services as may be
requested by the City Clerk.
E. In all particulars and recited in this Resolution, the election shall be held and conducted
as provided by law for holding municipal elections in the City.
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F. Notice of the time and place of holding the election is given and the City Clerk is
authorized, instructed, and directed to give further or additional notice of the election,
in the time, form, and manner required by Elections Code Section 121 1 1 and all other
applicable laws.
G. All ballots shall be tallied in a manner that complies with all applicable laws and as
designated by the Registrar of Voters.
H. The Orange County Registrar of Voters is hereby authorized to canvass the returns of
said election.
1. The City Clerk of the City of Huntington Beach shall receive the canvass from the
County as it pertains to the election on the measure, and shalt certify the results to the
City Council as required by law.
SECTION >. Arguments and Impartial Analysis
A. The City Council authorizes: (i) the City Council or any member(s) of the City
Council, (ii) any individual voter eligible to vote on the above measure; (iii) a bona
fide association of such citizens; or (iv) any combination of voters and associations to
file a written argument in favor of or against the City measure, in accordance with
Article 4, Chapter 3, Division 9 of the Elections Code of the State of California. Such
parties may change the argument until and including March 11, 2022 by 5:00 p.m.,
after which no arguments for or against the measure may be submitted to the City
Clerk. Arguments in favor of or against the measure shall each not exceed 300 words
in length. Each argument shall be filed with the City Clerk, signed and include the
printed name(s) and signature(s) of the author (s) submitting it, or if submitted on
behalf of an organization, the name of the organization, and the printed name and
signature of at least one of its principal officers who is the author of the argument.
B. The City Clerk shall comply with all provisions of law establishing priority of
arguments for printing and distribution to the voters, and shall take all necessary
actions to cause the selected arguments to be printed and distributed to the voters.
C. Pursuant to Section 9280 of the Elections Code, the City Council directs the City Clerk
to transmit a copy of the measure to the City Attorney. The City Attorney shall prepare
an Impartial Analysis of the measure, not to exceed 500 words in length, showing the
effect of the measure on the existing law and the operation of the measure. The City
Attorney shall transmit such Impartial Analysis to the City Clerk, who shall cause the
analysis to be published in the voter information guide along with the ballot measure
and provided by law. The Impartial Analysis shall be filed by the deadline set for
filing of primary arguments as set forth in subsection (A) above. The Impartial
Analysis shall include a statement indicating whether the measure was placed on the
ballot by a petition signed by the requisite number of voters or by the City Council.
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RESOLUTION NO. 2022-07
D. That the provisions of this Section 5 herein shall apply only to the election to be held
on .tune 7, 2022. and shall then be repealed.
SECTION 6. Rebuttals
Pursuant to Section 9285 of the Elections Code of the State of Califomia when the City Clerk
has selected the arguments for and against the various City initiated measures which will be
printed and distributed to the voter, the City Clerk shall send copies of the argument in favor
of the measures to the authors of the argument against and copies of the argument against to
the authors of the argument in favor. The authors or persons designated by them may prepare
and submit rebuttal arguments not exceeding 250 words. The rebuttal arguments shall be
filed with the City Clerk no later than March 21, 2022 by 5:00 p.m. Rebuttal arguments shall
be printed in the same manner as the direct arguments. Each rebuttal argument shall
immediately follow the direct argument which seeks to rebut. The provisions of this Section
6 herein shall apply only to the election to be held on June 7, 2022, and shall then be
repeated.
SECTION 7. Placement of the Ballot. The full text of the Ordinance shall not be printed in
the voter information guide, and a statement shall be printed on the ballot pursuant to Section
9223 of the Elections Code advising voters that they may obtain a copy of this
Ordinance/Measure at no cost, upon request made to the City Clerk.
SECTION S. Delivery of Resolution to the County. The City Clerk shall certify to the
passage and adoption of this Resolution and enter it into the book of original resolutions. The
City Council directs the City Clerk to deliver copies of this Resolution, including the
Ordinance/\Measure attached hereto as Exhibit I, to the Clerk of the Board of Supervisors of
Orange County and to the Registrar of Voters of Orange County, no later than March 11, 2022.
SECTION 9. Public Examination. Pursuant to California Elections Code Section 9295, this
Measure will be available for public examination for no fewer than ten (10) calendar days prior
to being submitted for printing in the voter information guide. The City Clerk shall post notice
in the City Clerk's office of the specific dates that the examination period will run.
SECTION 10. CEQA. The City Council hereby finds and determines that the ballot measure
related to organization or administrative activities of governments that will not result in direct
or indirect physical changes in the environment, and therefore is not a project within the
meaning of the California Environmental Quality .Act ("CEQA") and the State CEQA
guidelines, Section I5378(b)(5). This ballot measure is also exempt from CEQA review
pursuant to Business & Professions Code Section 26055(h) because any subsequent ordinance
adopted by the City Council permitting Cannabis Businesses will require environmental
review prior to any decision relating to the issuance of a permit or other authorization for the
Cannabis Business to commence operations.
SECTION 11. Severability. If any provision of this Resolution or the application thereof to
any person or circumstance is held invalid, such invalidity shall not affect other provisions or
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RESOLUTION NO. 2022-07
application, and to this end the provisions of this Resolution are severable. The City Council
hereby declares that it would have adopted this Resolution irrespective of the invalidity of any
particular portion thereof.
SECTION 12. The City Council will designate a subcommittee to draft an argument on the
Council's behalf. or designate specific Council Members to draft an argument under their
names. In the event such a Council authorized argument is not prepared, individual voters
(including Council i\4embers) may submit an argument, and a priority is set forth by Election
Code Section 9287 to be applied by the City Clerk in selecting the ballot argument to use.
SECTION 13. Effective Date of Resolution. This Resolution shall take effect immediately
upon its adoption.
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a
regular meeting thereof held on the lsc day of March 2022
Mayor
AYFES APPROVED TO ORM:
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Cite Clerk ZAnorileVu
_iVED )ND APPROVED: ACED AND APPROVED:
City Manager
Assistant City Manager
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RESOLUTION NO. 2022-07
EXHIBIT 1
COUNCIL-SPONSORED I\ffIATIVE MEASURE TO BE SUBMITTED DIRECTLY
TO THE VOTERS
The City Council for the City of Huntington Beach submits the following
measure to the voters of the City for approval and enactment:
ORDINANCE NO. X,YXX
AN ORDINANCE OF THE PEOPLE OF THE CITY OF
HUNTINGTON BEACH, CALIFORNIA, ADDING CHAPTER 325
TO TITLE 3 OF THE HUNTINGTON BEACH MUNICIPAL CODE
ESTABLISHING TAXES ON CANNABIS BUSINESSES
OPERATING WITHIN THE CITY OF HUNTINGTON BEACH
The People of the City, of Huntington Beach ordain as follows:
SECTION 1. Subject to the approval of two-thirds of the voters of the City of
Huntington Beach attheMunicipalElectionsodesignatedb}, the City Council in a
separate resolution placing the proposal on the ballot for such election,Chapter 325 is
hereby added to Title 3 ofthe 1-luntington Beach Municipal Code to read as folio—'vs:
Chapter 3.25 CANNABIS BUSINESS TAX
325.010 Title
3.25.020 Authority and purpose
3 25.030 Intent
3.25.040 Definitions
3.25.050 Tax Imposed
3.25.060 Reporting and remittance of tax
3.25.070 Payments and communications— timely remittance
3.25.080 Payment — when taxes deemed delinquent
3.25.090 Notice not required by City
3.25.100 Penalties and interest
3 25.110 Refunds and credits
3.25.120 Refunds and procedures
3.25.li0 Personal cultivation not taxed
3.25.140 Administration of the tax
3.25.150 Appeal procedure
3.25.160 Enforcement— action to collect
3.25.170 Apportionment
3.25.180 Constitutionally and legality
3.25.190 Audit and examination of premises and records.
3.25.200 Other license, permits, taxes, fees or changes
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3.25.210 Payment of tax does not authorize unlawful business
3.25.220 Deficiency determinations
3,25.210 Failure to report— nonpayment, fraud
3,25.240 Tax assessment — notice requirements
3.25.250 Tax assessment — hearing, application and determination
3.25.260 Relief from taxes —disaster relief
325.270 Conviction of violation —taxes not waned
3.25.280 Severabilitw
3.25.290 Remedies cumulative
3.25.300 Amendment or modifications
3.25.010 Title:
This ordinance shall be known as the Cannabis Business Tax Ordinance.
3.25.020 Authority and Purpose.
The purpose of this Ordinance is to adopt a special tax, pursuant
to Sections 37101 and 37100.5 of the California Government Code, upon Cannabis
Businesses that engage in business in the City of Huntington Beach ("City"), the Cannabis
Business Tax is levied based upon business Gross Receipts. The Cannabis Business Tax is
not a sales and use tax. a tax upon income, or a tax upon real property.
The Cannabis Business Tax is a special tax enacted solely for the special purpose of
supporting the Cites (a) police services for public safety and (b) behavioral health and
homeless prevention and intervention programs and services. All of the proceeds from the
tax imposed by this section shall be placed ina Special Fund and be available only for the
purposes identified in this Section 3.25.020,
3.25.030 Intent.
The intent of this Ordinance is to levy a tax on all Cannabis Businesses operating
in the City, regardless of whether conducting such business within the City would have been
legal at the time this section was adopted. Nothing in this section shall be interpreted to
authorize or permit any business activity that would not otherwise be legal or permissible in
the City under laws applicable to the activity at the time the activity is undertaken.
3.25.040 Definitions.
The following Nvords and phrases shall have the meanings set forth below when used in
this section:
"Business" shall include 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 services rendered by an Employee to his or her employer.
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"Calendar year" means January I 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" also means the
separated resin, whether crude or purified, obtained from Cannabis. `Cannabis" shall not
include "industrial hemp," unless otherwise specified.
"Cannabis Business" means any Business activity involving Cannabis or industrial
hemp, including but not limited to cultivating, transporting, distributing; manufacturing,
compounding, converting, processing, preparing, storing, packaging, delivering, testing,
dispensing, retailing and wholesaling of Cannabis, Cannabis products; industrial hemp,
industrial hemp products or of ancillary products and accessories, whether or not carried on
for gain or profit.
"Cannabis Business Tax" or `Business Tax," means the taxes due pursuant to this
Chapter for engaging in a Cannabis Business in the City.
"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 in Section 1 101 S.1 of
the California Health and Safety Code and is not limited to medicinal Cannabis products.
"City" means the City of Huntington Beach.
"Commercial Cannabis Cultivation" means cultivation of Cannabis undertaken in the
course of conducting a Cannabis Business.
"Commercial Cannabis Permit" means a permit issued by the City to a person
authorizing that person to operate a Cannabis Business or engage in business as a Cannabis
Business within the City.
"Cultivation" means any activity involving the planning, growing, harvesting, drying,
curing, grading, or trimming of cannabis and includes, but is not limited to, the operation of
indoor, outdoor, mixed light, or nursery. All outdoor or mixed light cultivation shall be
prohibited in the City.
"Distribution" means business activities including the procurement, sale; and transport of
cannabis and cannabis products between other 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.
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"Engaged in business as a Cannabis Business" means the commencing, conducting,
operating, managing or carrying on of a 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. A person shall be deemed engaged in business 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
business."
"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 Cannabis Business in the City.
"Gross Receipts," except as otherwise specifically provided herein, means, whether
designated a sales price, royalty, rent, slotting fee, 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. Notwithstanding the foregoing, 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
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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 located in the City, or if authorized by the "fax Administrator in writing in accordance
with section 3.25.140 (B);
6. Whenever there are included within the gross receipts amounts that 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;
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. Such agents or trustees
must provide the City s Tax Administrator 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.
9. Retail sales of 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 Fax Administrator has
excluded in writing by issuing an administrative ruling per Section 3.25.140 shall not be
subject to the Cannabis Business tax under this section.
"Indoor Cultivation" means the cultivation of Cannabis inside a permanent enclosed
building or structure.
"Lighting" means a source of light that is primarily used for promoting the biological
process of plant growth. Lighting does not include sources of light that primarily exist for the
safety or convenience of staff or visitors to the facility, such as emergency lighting, walkway
lighting, or light admitted via small skylights, windows or ventilation openings.
"Manufacturing" 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 their containers.
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"Person" means an 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, whether organized as a nonprofit or for-profit entity, and includes
the plural as well as the singular number.
"Processing" means a cultivation site that conducts only trimming, drying, curing,
grading, packaging, or labeling of Cannabis, industrial hemp and non-manufactured Cannabis
products.
"Retail, Retailer, or Retail Facility" means a licensed premises where Cannabis, Cannabis
products, or devices for the use of Cannabis or Cannabis products are offered, either
individually or in any combination for retail sale, including an establishment that delivers
Cannabis or Cannabis products as part of a retail sale.
"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, 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, but does not include the
return of Cannabis, Cannabis Products, industrial hemp and/or industrial hemp products to the
licensee from whom the Cannabis, Cannabis Product, industrial hemp and/or industrial hemp
product was purchased.
"State" means the State of California.
"State license," "license." or "registration" means a State license issued pursuant to
California Business & Professions Code Section 26050. and all other applicable State laws,
required for operating a Cannabis Business.
"Tax Administrator" means the City Manager of the City of Huntington Beach or his or
her designee.
"Testing Laboratory" means a Cannabis Business that (i) offers or performs tests of
Cannabis, Cannabis products, industrial hemp and/or industrial hemp products, (ii) offers no
service other than such tests. (iii) sells no products, excepting only testing supplies and
materials. (iv) is accredited by an accrediting body that is independent from all other persons
involved in the Cannabis industry in the State. and (v) is licensed by the State Bureau of
Cannabis Control or other State agency required by law.
3.25.050 Tax Imposed.
A. There is imposed upon each person who is engaged in business as aCannabis
Business Tax. Such tax is payable regardless of whether the business has been issued a
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RESOLUTION NO. 2022-07
Commercial Cannabis Permit to operate lawfully in the City or is operating unla%vfully. The
City's acceptance of a Cannabis Business Tax payment from a Cannabis Business operating
illegally shall not constitute the City's approval or consent to such illegal operations.
B. Pursuant to State law, the City Council may, by resolution or ordinance, set, increase or
decrease the rate of the Cannabis Business Tax. including the initial rate of Cannabis Business
Tax, within the minimum and maximum prescribed range of tax rates, and establish a class of
persons that is exempt or excepted from the tax or discontinue any such exemption or
exception. Notwithstanding the foregoing, in no event shall the City Council repeal this tax, or
set any adjusted rate that is less than the minimum rate, nor that exceeds the maximum rates
calculated pursuant to this section.
C. The maximum rate of the Cannabis Business Tax shall be calculated as follows:
l. Every person engaged in Retail sales of Cannabis and/or Cannabis Products,
including as a Retailer (dispensary)or non-storefront Retailer (retail delivery
business) shall be subject to up to a maximum tax rate not to exceed six
percent (6%) of Gross Receipts.
2. Every person engaged in the Indoor Cultivation for Cannabis shall be subject up
to a maximum tax rate not to exceed one percent (1%) of Gross Receipts.
3. Every person engaged in the operation of a Testing Laboratory for Cannabis
and/or Cannabis Products shall be subject to up to a maximunn tax rate not to
exceed one percent (1%)of Gross Receipts.
4. Every, person engaged in Distribution of Cannabis and/or Cannabis Products
shall be subject to up to a maximum tax rate not to exceed one percent (1%)of
Gross Receipts.
5. Every person engaged in manufacturing or processing of Cannabis and/or
Cannabis Products, or any other type of Cannabis Business not described in
Section 3.25.050 (C) (1), (2), (3), or (4) shall be subject to up to a
maximum tax rate not to exceed one percent (1%)of Gross Receipts.
Pet-sons subject to the Cannabis Business Tax shall register with the City and pay
any fees established by the City Council. Such fees shall not exceed the cost of providing
the service and not be considered as a tax and may be adjusted from time to time to recover
related costs by resolution of the City Council.
3.25.060 Reporting and remittance of tax.
A. The Cannabis Business Tax imposed by this section shall be paid,in
arrears, on a monthly basis. Each person owing a Cannabis Business Tax each calendar
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month shall, no later than the last day of the month following the close of the calendar
month, file with the Tax Administrator a statement ("Tax Statement") of the tax owed for
that calendar month and the basis for calculating that tax. The Tax Statement is required to
besubmitted on a form prescribed by the "fax Administrator. The Cannabis Business
Tax for each calendar month shall be due and payable on that same date that the Tax
Statement for the calendar month is due.
B. Upon cessation of a Cannabis Business,Tax Statements and Cannabis tax
payments shall be immediately due for all calendar months up to and including the
calendar month duringwhich cessation occurred.
C. The Tax Administrator may, at his or her discretion, establish
alternative reporting and payment periods for any taxpayer as the Tax Adm inistrator
deems necessary to ensure efficient and effective collection of the Cannabis Business Tax,
but no less frequently than quarterly. The Tax Admi nistrator may also require that a
deposit, to be applied against the Cannabis Business Taxes due for a calendar month, be
made by a taxpayer at the beginning of that calendar month. In no event shall the
deposit required by the Tax Administrator exceed the Cannabis Business Tax amount he
or she projects will be owed,in his or herjudgment, by the taxpayer for the calendar
month. The Tax Admuiistrator may require that a taxpayer make Cannabis Tax
payments via a cashier's check,money order, wire transfer,or similar instrument.
3.25.070 Payments and communications —timely remittance.
Whenever any Cannabis Tax 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 date would fall on
a Saturday, Sunday, or a holiday observed by the City, the due date shall be the last business
day of the month following the close of the calendar month which the City is open to the
public
3.25.080 Payment when taxes deemed delinquent.
Unless otherwise specifically provided under other provisions of this section, the
Cannabis Business "faxes required to be paid pursuant to this section shall be deemed
delinquent if not received by the "fax Administrator on or before the due date as specified in
Sections 3.25.060 and/or 3.25.070.
3.25.090 Notice not required by the City.
The City may as a courtesy send a tax notice to the Cannabis Business which owes the
City a Cannabis Business Tax. However, the Tax .Administrator is not required to send a
delinquency or other notice or bill to any person subject to the provisions of this section.
Failure to send such notice or bill shall not affect the validity of any tax or penalty due under
the provisions of this section.
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3.25.100 Penalties and interest.
A. Any person who fails or refuses to pay any Cannabis Business Tax required
to be paid pursuant to this section on or before the due date shall pay penalties and interest
as follows:
1. A penalty equal to ten percent (10°%) of the amount of the tax due, in
addition to the amount of the tax due, plus interest on the unpaid tax calculated
from the due date of the tax at the rate of one percent (1.0%) per month.
2. If the tax remains unpaid for a period exceeding one calendar month
beyond the due date, an additional penalty equal to twenty-five percent (25%) of
the amount of the tax, plus interest at the rate of one percent (1.0%) per month on
the unpaid tax and on the unpaid penalties.
3. Interest shall be applied at the rate of one percent(1.0%) per month
on 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 or electronic payment is submitted in payment of a
Cannabis Business Tax and the payment is subsequently returned unpaid by the bank for
any reason, the taxpayer will be liable for the tax amount due plus any fees, penalties and
interest as provided for in this section; and any other amount allowed under State law.
C. The City may revoke or refuse to renew the license required by Section
3.25.030 for any business that is delinquent in the payment of any tax due pursuant to this
section or that fails to make additional fee payments required by the Cite.
3.25.1 10 Refunds and credits.
A. No refund shall be made of any tax collected pursuant to this section,
except as provided in Section 3.25.120.
B. No refund of any Cannabis Business Tax collected pursuant to this
section shall be made because of the discontinuation. dissolution, or other termination of
a business.
3 25.120 Refunds and procedures.
A. Whenever the amount of any Cannabis Business Tax, penalty or interest has
been overpaid, paid more than once, or has been erroneously collected or received by the
City under this section, 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 (1) year of the
date the tax was originally due or paid, whichever came first.
B. The Tax Administrator, his or her designee, or any other City officer
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charged with the administration of this section 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-
C. In the event that the Cannabis Business Tax was erroneously paid in an
amount in excess of the tax due, and the error is attributable to the City, the City shall
refund the amount of tax erroneously paid; provided that (i) a claim for refund has been
timely filed with the Tax Administrator, and (ii) the refund cannot exceed, under any
circumstance, the amount of tax overpaid during the twelve months preceding the last
month for which the claim states the tax was overpaid.
3.25.130 Personal cultivation not taxed.
The provisions of this section shall not apply to personal Cannabis cultivation or
personal use of Cannabis, to the extent those activities are authorized in the State's
"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.
3.25.140 Administration of the tax.
A. it shall be the duty of the Tax Administrator to collect the taxes, penalties,
fees, and perform the duties required by this section.
B. For purposes of administration and enforcement of this section generally,
the "fax Administrator may from time to time promulgate such administrative
interpretations, rules and/or procedures consistent with the purpose, intent and express
terms of this section as he or she deems necessary, to implement or clarify such
provisions or aid in enforcement.
C. The "fax Administrator may take such administrative actions as needed to
administer the Cannabis Business "fax, including but not limited to:
1. Provide to all Cannabis Business taxpayers forms for the reporting
of the tax;
2. Provide information to any taxpayer concerning the provisions of
this section;
3. Receive and record all taxes remitted to the City as provided in this
section;
4. Maintain records of taxpayer reports and taxes collected pursuant
to this section;
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5. Assess penalties and interest to taxpayers pursuant to this section:
6. Determine amounts owed under and enforce collection pursuant to
this section.
3.25.150 Appeal procedure.
,Any taxpayer aggrieved by any decision of the Tax Administrator with respect to the
amount of tax, interest, penalties and fees, if any, due under this section may appeal to the City
Council by filing a notice of appeal with the City Clerk within thirty (30) calendar days of the
serving or mailing of the Tax .Administrator's determination of the amount due. The City
Clerk, or his or her designee, shall fix a time and place for hearing such appeal, and the City
Clerk, or his or her designee, shall give notice in writing to such operator at the last known
place of address. The finding of the City Council shall be final and conclusive and shall be
served upon the appellant in the manner prescribed by this section 3.25.150 for service of
notice of hearing. Any amount found to be due shall be immediately due and payable upon the
service of the notice.
3.25.160 Enforcement—action to collect.
Any taxes, penalties and/or fees required to be paid under the provisions of this section
shall be deemed a debt owed to the City. Any person owing money to the City under the
provisions of this section shall be liable in an action brought in the name of the City for the
recovery of such debt. The provisions of this section shall not be deemed a limitation upon the
right of the City to bring any other action including criminal, civil and equitable actions, based
upon the failure to pay the Cannabis Business Tax, penalties and/or fees imposed by this
section, or the failure to comply with any of the provisions of this section.
3.25.170 Apportionment.
If a business subject to the Cannabis Business Tax is operating both within and outside
the City, it is the intent of the City to apply the Cannabis Business Taz 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 Tax Administrator may
promulgate administrative procedures for apportionment as he or she finds useful or necessary.
3.25.180 Constitutionality and legality.
The Cannabis Business Tax is intended to be applied in a manner consistent with
the United States and California Constitutions and State law. None of the tax provided for
by this section 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 or State law. If a person believes that the tax, as applied to him or
her, is imperrnissible under applicable law, he or she may request that the Tax
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Administrator release him or her from the obligation to pay the impermissible portion of
the tax.
3.25.190 Audit and examination of premises and records.
A. For the purpose of ascertaining the amount of Cannabis Business Tax owed or
verifying any representations made by any taxpayer to the City in support of his or her tax
calculation, the Tax Administrator shall have the power to inspect any location where
commercial Cannabis Cultivation occurs 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 Cannabis
Businesses in the City. In conducting such investigation, the Tax Administrator shall have the
power to inspect any equipment, such as but not limited to 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 Cannabis Business Tax imposed by this section 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 Tax .Administrator or his/her designee shall have the right to inspect at all
reasonable times.
C. Should the Tax Administrator be required to perform an audit of the records
of any Cannabis Business for failure to timely or accurately report Cannabis Business Taxes
pursuant to sections 3.25.060 and/or 3.25.070, the entire cost of the audit shall be assessed
against the operator.
3.25.200 Other licenses, permits, taxes, fees or charges.
Nothing contained in this section shall be deemed to create, replace, amend, repeal or
be in lieu of, or in any way affect any requirements for, any Commercial Cannabis Permit or
License the City may require for any purpose. In addition, nothing contained in this section
shall be deemed to create, replace, amend, repeal or be in lieu of, or in any way affect any
requirements for, 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.
3.25.210 Payment of tax does not authorize unlawful business.
A. The payment of a Camtabis Business Tax required by this section, and its
acceptance by the City, shall not entitle any person to carry on any Cannabis Business.
B. No tax paid under the provisions of this section shall be construed as
authorizing the conduct or continuance of any illegal or unlawful business, or any
business in violation of any local or state law.
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3.25.220 Deficiency determinations.
If the Tax Administrator is not satisfied that any statement filed as required under
the provisions of this section is correct, or that the amount of Cannabis Business 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 (3) 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 Cannabis Business, a deficiency determination
may be made at any time within three (3) years thereafter as to any liability arising from
engaging in such Cannabis 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 Section 3.25.240.
3.25.230 Failure to report — nonpayment, fraud
A. Under any of the following circumstances, the Tax Administrator may make
and give notice of an assessment of the amount of Cannabis Business Tax owed by a person
under this section at any time:
1. If the person has not filed a complete statement required under the
provisions of this section;
2. If the person has not paid the tax due under the provisions of this
section:
3. If the person has not, after demand by the Tax Administrator, filed a
corrected statement, or furnished to the Tax 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 section; or
4. if the Tax Administrator determines that the nonpayment of any
Cannabis Business tax due under this section is due to fraud, a penalty of twenty-five
percent (25%) of the amount of the tax shall be added thereto in addition to penalties
and interest otherwise payable under this section and any other penalties allowed by
law.
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 provision of this section and
shall include the amount of any penalties or interest accrued on each amount to the date of the
notice of assessment.
19
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RESOLUTION NO. 2022-07
3.25.240 Tax assessment — notice requirements.
The notice of assessment shall be served upon the person either by personal delivery,
by overnight delivery by a nationally-recognized courier service, 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 section: 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 purpose of Section 3.25.240 , service by overnight
delivery shall be deemed to have occurred one (1) calendar day following deposit with a
courier and service by mail shall be deemed to have occurred three (3) days following deposit
in the United States mail.
325.250 "fax assessment hearing, application and determination.
Within thin (30) calendar days after the date of service of the notice of assessment
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
Cannabis Business Tax assessed by the Tax .Administrator shall become final and
conclusive. Within thirty (30) calendar 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
no later than thirty (30) calendar 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 (5) calendar 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 (if necessary) the proper tax to be charged and shall give written
notice to the person in the manner prescribed in Section 3.25.240 for giving notice of
assessment.
0.25.260 Relief from taxes—disaster relief.
A. If Carmabis Business is unable to comply with any tax requirement
imposed under this section due to a disaster, the business may notify the Tax
Administrator of its inability to comply and request relief from the tax requirement. For
purposes of this section, "disaster" means tire, tlood,storm,tidal wave, earthquake,or
public calamity,whether or not resulting from natural causes.
B. The Cannabis Busumess shall provide any information required by the
Tax Administrator including,without limitation, why relief is requested, the time period
for which the relief is requested,and the reason relief is needed for the specific amount
of time. The Cannabis Business agrees to grant the Tax Administrator or his'her designee
access to the location where the Cannabis Business has been impacted due to a disaster.
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22-11060/277010
RESOLUTION NO. 2022-07
C. The Tax Administrator, in his/her sole discretion. may provide relief from
the Cannabis Business Tax requirement for businesses whose operations have been
impactedby a disaster if such tax relief does not exceed fifteen thousand (S15,000)
dollars. Such temporary relief may be granted for a reasonable amount of time,in the
Tax Administrator's sole discretion, and the amount and duration ofrebef should be based
upon how long it would reasonably take for the Cannabis business to recover from the
disaster. Further,the Tax Administrator may require that the Cannabis Business
follow certain conditions to receive temporary relief from the Cannabis Business Tax
requirement.
325.270 Conviction for violation—taxes not waived.
The conviction and punishment of any person for failure to pay the required
Cannabis Business 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 section or of any State
law requiring the payment of all taxes.Any person violating any of the provisions of this
section shall be guilty of misdemeanor.
325.250 Severability.
If any provision of this section, or its application to any person or circumstance, is
determined by a court of competent jurisdiction to be unlawful, unenforceable or othenvise
void, that determination shall have no effect on any other provision of this section or the
application of this section to any other person or circumstance and, to that end, the provisions
hereof are severable.
1.25.290 Remedies cumulative.
All remedies and penalties prescribed by this section 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 section.
3.25.300 Amendment or modification.
Except as set forth in this section 325.300, this section may be amended or
modified but not repealed by the City Council without a vote of the people. However,
as required by Article XIII C of the California Constitution, voter approval is required
for any amendment that would expand, extend, or increase the rate of any tax levied
pursuant to this section. The people ofthe City of Huntington Beach affirm that the
following actions shall not constitute an increase of the rate of a tax:
A. The restoration or adjustment of the rate of the tax to a rate that is neither
less nor higher than that allowed by this chapter,in those circumstances where, among
21
22-11060/277010
RESOLUTION NO. 2022-07
others. the City Council has previously acted to reduce or increase the rate of the tax
within the allowed range or is incrementally implementing an increase authorized by this
chapter;
B. An action that interprets or clarifies (i) the methodology of applying or
calculating the Cannabis Business Tax or (ii) any definition applicable to the tax, so long
as the interpretation or clarification (even if contrary to some prior interpretation or
clarification) is not inconsistent with the provisions of this Chapter 325; or
C. The collection ofthe tax unposed bythis section even ifthe City had, for
some period of time, failed to collect the tax.
SECTION 2. Pursuant to Article XIII B of the California Constitution, the appropriation
limit for the City of Huntington Beach will be increased by the maximum projected
aggregate collection authorized by the levy of this special tax, as indicated in Section 1, in
each of the years covered by this Ordinance plus the amount, if any, by which the
appropriation limit is decreased by law as a result of the levy of the special tax set forth in
this Ordinance.
SECTION 3. If any portion of this Ordinance is declared invalid by a court of law or other
legal body with applicable authority, the invalidity shall not affect or prohibit the force and
effect of any other provision or application of the Ordinance that is not deemed invalid. The
voters of the City hereby declare that they would have circulated for qualification and/or voted
for the adoption of this Section, and each portion thereof, regardless of the fact that any portion
of the initiative may be subsequenth deemed invalid.
SECTION 4. Pursuant to California Constitution Article XIHC §(2)(b) and California
Elections Code §9217, this Ordinance shall take effect only if approved by two thirds of
the eligible voters of the City of Huntington Beach voting at the Special Election to be
held on June 7, 2022, and shall take effect ten (10)days after the City Council has certified
the results of the Municipal Election by resolution.
SECTION 5. This order shall take effect according to law ten days after certification of
the election at which it is adopted.
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a
regular meeting thereof held on the day of . 20
22-11060/277010 u
RESOLUTION NO. 2022-07
Mayor
ATTEST: APPROVED AS TO FORM:
City Clerk City Attorney
REVIEWED AND APPROVED: INITIATED AND APPROVED:
City Manager
Assistant City Manager
23
22-11060/277010
Res. No. 2022-07
STATE OF CALIFORNIA
COUNTY OF ORANGE ) ss:
CITY OF HUNTINGTON BEACH )
I, ROBIN ESTANISLAU, the duly elected, qualified City Clerk of the
City of Huntington Beach, and ex-officio Clerk of the City Council of said City, do
hereby certify that the whole number of members of the City Council of the City of
Huntington Beach is seven; that the foregoing resolution was passed and adopted
by the affirmative vote of at least a majority of all the members of said City Council
at a Regular meeting thereof held on March 1, 2022 by the following vote:
AYES: Bolton, Delgleize, Carr, Moser, Kalmick
NOES: Peterson, Posey
ABSENT: None
RECUSE: None
City Clerk and ex-officio Clerk of the
City Council of the City of
Huntington Beach, California
DRAFT
RESOLUTION NO.
A RESOLUTION OF THE: CITY COUNCIL OI' THE CITY OF
HUNTINGTON 131 ACI-I CALLING I-OR THL PLACENIENT OF A
GI NI RAL, TAX \1LASIJREON 'fl-IENOVE\-INI IZS- 2022 (i1 NfiRAl-,
MUNICIPAL ISLECIION BALLOT FOR II-II SUBMISSION TO THE'
QUAI:IFIED VOTERS OF A PROPOSG:D ORDINANCI': ADDING
CHAPTER 325 TO TITLE? 3 OF THE HUNTINGTON
BEACHINvIUNICIPAL CODE, ESTABLISHING A GENERAL TAX
ON CANNABIS BUSINESSES OPERATING \\MITI IIN THE CITY OF
I iUNTINGTON BEACI I; REQUESTING ELHCIION SIiR VICI_,S FROM
THE COUNTY OP ORANGE TO CONDUCT SAID ELECTION: AND
S1 fIING RLJLES AND DEADLINES FOR ARGUMENTS AND
REBUIIAI_S FOR AND AGAINS'I' "TI-IEORDINANCI .
WHEREAS, pursuant to California Government Code sections 37100.5 and
3710E the City of Huntington Beach has the authority to establish a local bnSInCSS tax
upon Cannabis Businesses that engage in business in the City; and
WHEREAS, pursuant to Section 9222 of the California Elections Code, the
City Council has authority to place propositions on the ballot to be considered at it
Municipal F'.1ection: and
WHEREAS, the City Council desires to submit to the voters an ordinance
establishing both (i) a not-to-exceed rate of 6% local general tax on the Gross Receipts
received by any cannabis Retail business and (ii) it not-to-exceed rate of I% local general tax
on any other cannabis busincss, including but not limited to Indoor Cultivation.
\4anufacuu ing, Testing Laboratory, and Distribution: and
WHEREAS, the proposed Cannabis Business TaN is a general tax, the proceeds
of which would be deposited into the City's general fund for general municipal services
to the public and
WIiEREAS , on November 6, 1996, the voters of the State of California
approved Proposition 218 (California Constitution. Article XIIIC), an amendment to
the State COnSt itUtiOn Which rcqUires that ill]general taxes which are imposcd.extendcd or
increased must be submitted to the electorate and approved by a majority vote of the
qualified electors voting inthc election and
WHEREAS, the proposed ordinance would establish a general tax which is
subject to Proposition 218: and
1
NN'FIEREAS, pursuant to Proposition 218 (California Constitution Article \IIIC,
§2(b)), the general rule is that any local election for the approval of a general tax
must be eonsoliclatecl with a regularly scheduled general election for members of the
eoverninebody ofthe local government;arid
W11 REAS, the next regularly scheduled general election for members of the
governing body of the local government is set for November 8,2022:Luxi
VVIIEREAS, pursuant to Proposition 62 and Government Code section 53724.
an ordinance or reSOlution proposing a general tax nnut he approved by a two-thirds
vote of all members of the legislative body of the local government prat- to being
submitted to the votes and
WHEREAS, the City Council also desires to request that the Orange Count\
Registrar of Voters provide full election services to the City in order to conduct the General
Municipal Election for the Ordinance/Measure described herein to be held on November
8. 2022; and
WHERIP.AS. the Cit\ Council also desires to establish deadlines and rules for
the submission of written arguments and rebuttals for and against the Ordinance in
accordance with applicable California Elections Code proccdures;and
WHEREAS. the specific terms relating to the Cannabis BusinesS Tax are
providedfor intheorc]inancetobcconsidet-edbythequalitiedvoters,attachcdheretoas
Exhibit I (the "Ordinance" or "Measure") and by this reference made an operative part
hereof. and in accordance with all applicablelaws.
NOW. THEREPORI . THE CITY COUNCIL- OF THE CITY OF,
HUNTINGTON 131=ACH, CALIFORNIA_. DOES RESOI.V13, DECLARE.
DETI::RMINE, AND ORDER AS FOL.I.O\\'S:
SECTION I. Recitals. The City Council hereby finds an(] determines that the
foregoing recitals are true and correct, are incorporated herein and by this reference
made an operative part hereof.
SUCTION 2 Submission of Ballot Measure. '[-he City Council of the City, pursuant to
its right and authority as contained in California Propositions 218 and 62,Ciovcrnment
Code 53724, and Elections Code section 9222. hereby orders the Ordinance attached
hereto as Exhibit I to be submitted to the qualified voters of the City at the General
Municipal Election to be held on November 8. 2022. The proposed Ordinance shall be
in the form attached hereto as Exhibit I to this Resolution zinc] is incorporated b_v this
rctcrcnce as if fully set forth herein.
2
SLCTION 3: Ballot MCast[t'C. ']'he City Council, pursuant to us right and authority,
does herchy order that the 69casu1'c shall be presented and printed upon the ballot
submitted to the qualified voters in the manner and form set forth in this Section 3. On
the ballot to be submitted to the qualified voters at the Gencral Municipal Election to be
hckl on November S. 2022. in addition to any other matters required by haw. there shall be
printed substantially the Hollowing:
NleaSUrC The City of Huntington Beach Cannabis Business Tax Measure
TO BE DETERMINED
Y I--.S
(This language is for example: "Shall the City adopt a general tax
measure of up to 6% of gross receipts on cannabis retailers and up to
1% of gross receipts on all other cannabis businesses, which is
expected to generate an estimated S300,000 to S600,000 annually for NO
general municipal services to the public? )
SE'CfION 4. Election Procedures.
A. The ballots to be used at the election shall be in the form and content as required by Law.
B. In accorda rice with Section 10403 of the Elcct ions Codc,the Board of Supery isorS of
Orange County is hereby requested to consent to tlx: consolidation of a Gencral
MUllicipal Election with the Statewide General Election on November 8, 2022. for
the purpose of submittingto the vote[-,of the Cay of Huntington Beach,a question
relatingto the adoption ofthe proposed ordinance.
C. In addition. in accordance with Section 10002 of the E--Icctions Code, the Board of
Supervisors is hereby rcquestcd to consent to having the County Election
DcparunendReg'su-ar of Voters render full election services to the City of Huntington
Beach as may be requested by the City Clerk of said Cite, the County of Orange
to be reimbursed in full for Such services as are performed.
D. The full election services which the City of Huntington Beach requests tlx: Registrar
of'Voters, or such other official as tray be appropriate, to perform and which such
officer is hereby authorized and directed to perform, if said Board of Supervisors
consents, include: the preparation, printing and mailing of sample ballots: the
establishment or appointment of vote centers, and election officers,thc preparation,
printing, mailing and furnishing of vote-hy-mail ballots, making such publications as
are required by law in connection therewith:thc furnishing of ballots, voting booths
and other necessary supplies or materials for polling pkwes;the canvassing of' the
returns of tlx election and the furnishing of the resuhs of such canvassing to the CitN
3
Clerk of the City of E luntinmon Beach;and the performance of such other election
services as play be requested by the City Clerk.
E. In all particulars not recited in this Resolution. the election shall be held and
conducted as provided by law for holding municipal elections inthe City.
F. Notice of the time and place of holding the election is given and the City Clerk
is authorized, instructed and directed to give further or additional notice of, the
election, in tinge, form, and manner as required by law.
G. All ballots shall be tallied in a manner that complies with all applicable laws and
as designated by the Registrar of Voters.
H. The Oramoc County Registrar of Voters is hereby authorized to canvass the retw"ns
of said election.
I. "fhe City Clerk of the City ol' Huntington Beach shall receive the canvass from
the COUMV as it pertains to the election on the measure. and shall certify the
results to the City COm1C11. as required by law.
SECTION 5.Argunlents and Impartial A nalysis
A. -['he City Council authorizes (i) the City Council or any mcnlbcr(s) of the City
Council, (ii) any individual voter eligible to vote on the above measure. (iii)
a Kona tide association of such citizens or (iv) any combination of voters and
associations. to lilt a written argunlcnt in taVor of or against the City nleasurc.
in accordance with Article 4, Chapter 3. Division 9 of the Elections Code of the
State of' California and may change the argunlcnt until and including
by 5:00 p.m.. after which no arguments for or against the measure
may he submitted to the City Clerk. Arguments in faVOr of or against the nleasurc
shall each not exceed 300 words in length. Bach argument shall be filed with the
City Clerk. signed, and include the printed name(s) and signatttre(s) of the
author(s) submitting it,or if submitted on behalf of an organization. the name of-
the organization. and the printed name and signature ofat ]cast one of its principal
officers who is the author of the argument.
B. The City Clerk shall comply with all provisions of' law establLShing priority of
arguments for printing and distribution to the Voters,and shall take all necessary
actions to cause the selected arguments to be printed and distributed to the Voters.
C. Pursuant to Section 9280 of the Llections Code. the City Council directs the CitV
Clerk to transmit a copy ol'the mcasurc to the City Attorney. The City Attorney shall
prepare an Impartial Analysis of the measure, not to exceed 500 words in length,
showing the effect ol, the nleasurc on the existing law and the operation of the
4
measure. The City Attorney shall transmit such Impartial Analysis to the Cite
Clerk, who shall cause the analysis to be published in the voter information guide
along with the ballot measure as provided by law. The Impartial Analysu shall be
filed by the deadline set for filing of primary arguments as set forth in subsection
(A) above. The Impartial Analysis shall include a statement indicating whether the
measure was placed on the ballot by a petition signed bN the raluisitc number ol'
voters or bV the CitV Council.
D. That the provisions of this Section 5 herein shall apply only to the election to be
held on November 8, 2022 and shall then be repealed.
SECTION G. Rebuttals
A. Pursuant to Section9285ofthcl'"IectionsCodeofthestatcofCalilin'nia.whcnthe
City Clerk has selected the arguments for and against the various City initiated
measures which will be printed and distributed to the voter, the City Clerk shall
send copies of the argument in favor of the measures to the authors of the
argument against, and copies of the argument against to the authors of the
argument in favor. The authors or persons designated by them may prepare
and submit rebuttal angumentsnotexceeding250words. "I'hcrcbuualarI'umcnts
shall be filed with the City Clerk not later than by 5:00 pm.
Rebuttal arguments shall be printed in the same manner as the direct arguments.
Each rebuttal argument shall immediately follow; the direct argument which it
seeks to rebut.
B. The provisions of'this Section 6 herein shall apply only to the election to be held
on November 8. 2022.and shall then be repealed.
SECTION 7. Placement on the Ballot. The full text of the Ordinance/Measure shall not
be printed in the voter information guide, and a statement shall be printed in the ballot
pursuant to Section 9223 of the fi,lections Code advising Voters that they may obtain a
copy of this Ordinance/Mcasurc at no cost.upon request made to the City Clerk.
SECfION 8. Delivery of Resolution to County. The City Clerk shall certify to the
passage and adoption of this Resolution and enter- it into the book of original resolutions.
The City Council directs the City Clerk to deliver copies of this Resolution. including
tlx: Ordinance/Measure attached hereto as Exhibit I, to the Clerk of the Board of
Supervisors of Orange County and to the Registrar of Voters of-Orange County.
SFC'ION 9.Public Examination. Pnr5nant to California Flections Code section 9295,
this Measure will be available for public examination for no fewer than ten (10) calendar
days prior to being submitted for printing in the voter information guide. The City Clerk
shall post notice in the City Clerk's of f icc of the specific dates that the exam ination period
Will run.
5
SECTION I O.CEQA.Thc City Counci I hereby finds and determines that the ballot mcasurc
relates to or_eanizational or administrative activities of" governments that will not result
in direct or indirect physical changes in the environment. and therefore is not a pro
ject
within the mcanin: of" the California Environmental Quality Act ("CEQA") and the
State CEQA Guidelines, section 15378(b)(5). This ballot measure is also exempt from
CEQA rcyicw pursuant to Business & Prolessions Code 26055(h) because any
subsequent ordinance adopted by the City Council permitting cannabis businesses will
require environmental review prior to any decision relating to the issuance of a permit
or other authorization for the cannabis business to commence operations.
SECTION I1.Scverability. If any provision of this Resolution or the application thereol'
to any person or circumstance is held invalid. Such invalidity shall not affect other
provisions or applications of the Resolution which can be given effect without the irlValid
provision or application, and to this end the provisions of this Resolution are severable.
The City Council hereby declares that it would have adopted this Resolution
irrespective of the invalidity of any particular portion thereof
SECTION 12. Council will designate a subcommittee to draft an argument on COUnCH'S
behalf: or designate specific Council \4embers to draft an argument under their names. In
the event such a Council authorized argument is not prepared. individual voters (including
Council NIcmbers) can submit an argument, and a priority is set forth by Election Code
Section 9287 to be applied by the City Clerk in selecting the ballot argument to use.
SECTION 13. Effective Date of Resolution. This Resolution shall take effect
immediately upon its adoption.
PASSI_,D AND ADOI'1'I:il by the City Council ol'thc Cit_v of I-luntington Beach
at a regular meeting thereof held on the day of 20_
6
I3\I11131"I' I
COUNCIL-SPONSORED INffIATIVF iiM1 ASUR1 TO RE, SUBMITII3D DIRFCTLY
TO "II-II VOIIRS
The Cite Council for the City of IlUntington Beach submits the following
measure to the voters ofthe City for approval and enactment:
DRAFT
ORDINANCE NO.
AN ORDINANCE OF THE PEOPLE OI' THE CITY OF
HUNIINGTON BI ACI-l. CALIFORNIA. ADDING CHAPTER 3.25
TO 'ITfI..E 3 OI' "I'Ill.i IIUN"I'INGI'ON BEACIIMUNICIPAL, CODE
ES fABI-ISHING A TAX ON CANNABIS BUSINL'SSI S
OPERATING WITH I NTH E CITY OF IIUN1INGTON BEACII
The People of the City ol' I lUntington Beach ordain as fol lows:
SECTION L Subject to the approval of a majority of the voters of the City of
Huntington Beach atthcGencral Municipal llectionsodesi_natedby the City Council
in a separate resolution placing the proposal on the ballot for such election. Chapter
325 is hereby added to Title 3 of the I-luntington Beach Municipal Code to read as
follows:
Chapter 3.25. CANNABIS 13USIN1 SS TAX
3.25.010 Title
3 25.020 Authority and purpose
3.25.030 Intent
325.040 Definitions
325.050 "fax imposed
325.060 Reporting and remittance oftax
325.070 Payments and communications - timely remittance
3.25.080 Payment - when t:ueS (leaned delinquent
3.25.090 Notice not required by City
3.25.100 Penalties and interest
3.25.110 Refunds and credits
3.25.120 Refund, and procedures
3.25.130 Personal cUltivation nottaxed
325.140 Administration of the tax
3.25.150 Appeal procedure
3.25.160 Enforcement - action to collect
3.25. 170 Apportionment
3.25. 180 Constitutional itv and legality
3-25.190 Audit and examination of'premises and records
3.25.200 Other licenses, permits, taxes.fees or charges
7
325.21 0 Pavmau of tax does not author've unlawful IYIrSInCS3
3.25.220 Deficicncv determinations
3.25.230 Failure to report - nonpayment,fraud
3.25.240 Tax assessment -notice rcyuirenacnts
3.25.250 Tax assessment - hcaring.application, and determination
3.25.260 Relief from taxes —disaster relief
3.25270 Conviction for violation -taxes riot waived
3.25 2R0 Scverabilit
3.25-290 Remedies cumulative
3.25.300 Amendment or-modification
325.010 Title.
This ordinance shall be known as the Cannabis Business Tax Ordinance.
325.020 AUlhOritV and Purpose.
The purpose ol'this Ordinance is to adopt a tax, pursuant to Sections 37101 and
17100.5 of the California Government Code, upon Cannabis businesses that engage in
business in the City of' Huntington Beach ("City"). the Cannabis Business Tax is levied
based upon business Gross Receipts. The Cannabis Business Tax is not a sales and use
tax, a tax upon income, or a tax upon real property.
The Cannabis Business 'fax is a general 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 section shall be placed inthe City's General Fund and be
available for any Lt\vful nunaicipal pwpose.
325.030 Intent.
The intent of this Ordinance is to levy a tax on all Cannabis Businesses
operating in the City. regardless of whether such business would have been legal at the
time this section was adopted. Nothing inthis section shall be interpreted to authorize or
permit any business activity that would not otherwise he legal or permissible under Laws
applicable to the activity at the tittle the activity is undertaken.
3.25.40 Definitions.
The following words and phrases shall have the meanings set Barth below when
used in this section:
"Business" shall include all activities engaged in. or caused to be engaged in,
within the City, including any commercial or indusu'iA enterprise, trade, profession,
occupation, vocation. calling, or livelihood, whether or not carried on for gain or profit,
bill shall not include the services rendered by an I'mployce to his or her employer.
8
"Calendar year" means lanuary I through December 31 of the same year.
"Cannabis" means all parts of the plant Cannabis Sativa Linnaeus, Cannabis
Indira. or Cannabis Rudcralis, whether growing or not; the seeds thereof: the resin,
cyhether crude or purified. extracted front 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" shall not include "intlusvial hemp," unless otherwise specified.
"Cannabis Business"means any businessactivity involving cannabis or industrial
hemp, including but not lincited to Cultivating, transporting. distributing,
nruntfacuuing, compounding, converting, processing, preparing. storing,packaging,
delivering, testing. dispensing, retailing and wholesaling of Cannabis. Cannabis
Products, industrial hemp, industrial hemp products or of ancillary products and
accessories,whethe ror not carried on for gain or profit.
"Cannabis Business "has" or "Bu$InCJS Tax," means the taxes due pursuant to
this chapter for engaging in a Cannabis Business in the City.
"Cannabis Product" means raw cannabis that has undergone a process whereby
the raw agricultural product has been transformed into concentrate,an edible
product, ar a topical product. "Cannabis Product" also means Cannabis products as
defined by Section 1101 S. I of the California Health and Safety Code and is not
limited to medicinal Cannabis products.
"City" means the City of Huntington Beach.
"Commercial Cannabis Cultivation" means cultivation of Cannabis undertaken
in the course of conductina.1 Cannabis Business.
"Commercial Cannabis Permit" means a permit issued by the City to a person
authorizin_ that person to operate a Cannabis Business or engage in business as
a Cannabis Business within the City.
"Cultivation" nccans any activity involving the planting, growing, harvesting,
drying,curing, grading, or trimming of cannabis and includes. but is not limited to,
the operation ofan indoor. outdoor. mixed light, or nurscrv. All outdoor or mixed light
cultivation shall be prohibited in the City.
"Distribution" means business actiyitirs including the procurement, sale, and
transport of Cannabis and Cannabis Products between other 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 fancily, partner,associate,
9
agent, manager or solicitor,and each and every other person emploved or working
in such business for a wage, sala v. commission_ barter or any other form of
compensation.
"Frumoed in business as a Cannabis 13usincss" means the commencing.
conducting,operating. ill anagingorcarrying oil ofaCannabis 13usiness.whcthcrdone
as owner,or by means of an officer.agent.manager.employee.or otherwise.whether
operating from a lixed 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:
1. Such person or pci:son's employee maintains a lined place of business
within the City for the benefit or partial henellt ofsuch 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 inthe City forsale inthc ordinarycourse ofbusiness;
4. Such person or person's employee regularly conducts solicitation ofbusiness
within the Citv: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 business."
"Evidence of doing husincss" mcans evidence such as, without limitation, use oh
signs, circulars. cards or any other advertising media, including the use of intcrnet or
telephone solicitation,or representation to a government agency or to the public that such
person is engaged in a Cannahis Business in the Ciq'.
"Gross Receipts," except as otherwise specifically provided herein, mcans, whether
designated a sales price. royalty. rent, slotting fec. 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),wahout 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. Notwithstanding the foregoing, die following shall be
excluded from Gross Receipts:
1. Cash discounts where allowed and taken on sales;
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2. Any tax required by law to be included in or added to the purchase price and
collected from the consunrer or purchaser;
3. Such part of'tire 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 ol'sales.trades or transactions between departments or units of the
same business located in the Citv, or if authorized by the lax Administrator in
writing inaccordance with section 325.140 (1'3);
6. Whenever there are included within the Gross Receipts amounts that reflect
sales Ior 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
the\, 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:
& Amounts collected lo' 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. Such
agents or trustees must provide the City's 'I'ax Admi nistrator 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 t'usle'CS.
9. Retail sales of t-shirts. sweaters, hats, stickers, kev chains, baes. books.
posters, rolling papers,Cannabis accessories such as pipes, pipe screens. vapc
pen hatteries (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 325.140 shall not be subject to the
Cannabis Business tax under this section.
"Indoor Cultivation" means the cultivation of Cannabis inside a permanent enclosed
buildinL or structure.
"Lighting" means a source of light that is primarily used for promoting the biological
11
process of plant growth. I..ighting does not include sources of light that primarily gist for
the safety or convenience of staff or vLsitors to the facility, such as entcrgencv lighting,
walkway lighting.or light admitted via small skylights,windows or ventilation openings.
'`Manufacturing' 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 their containers.
"Person" means an individual, firm, partnership, joint venture. association.
corporation, limited liability company, estate, trust, business oust, rccciver, syndicate, or
any other group or combination acting as a unit, whether organized as a nonprofit or for-
profit entity. and includes the plural as well as the singular number.
"Processing" means a cultivation site that conducts only (rimming, drying, curing.
grading, packaging, or labeling of cannabis, industrial hemp and non-manufactured
Cannabis Products.
"Retail, Retailer, or Retail Facility' means a licensed premises where Cannabis,
Cannabis Products. or devices for the use of Cannabis or Cannabis Products are offered. either
individualIV or in anv combination for retail sale, includin_ an establishment that delivers
Cannabis or Cannabis Products as part of a retail sale.
"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. Cannabis
Products,industrial hemp and/or industrial hemp products arc 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 far the purchase of the same, but
does not include the return of Cannabis, Cannabis Products. industrial hemp and/or
industrial hemp products to the licensee from whom the Cannabis, Cannabis Products,
industrial hemp and/or industrial hemp product was purchased.
"State" means the State of California.
"State license." "license." or "registration" means a State liccnsc issued pursuant to
California Business & Professions Code Section 26050, and all other applicable State laws.
required for operating a Cannabis Business.
"Tax Administrator" means the City Alanager of the City of Huntington Beach or his
or her desienec.
Testing Laboratory" means a Cannabis Business that (i) oilers or performs tests of
Cannabis. Cannabis Products.industrial hemp and/or industrial hemp products, (ii)offers no
service other than such tests, (iii) sells no products, excepting only testing supplies and
materials. (Iv) is accredited by an accrediting body that is independent from all other
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persons involved in the Cannabis industry in the State, and (y) is licensed by the State Ilurcau
of Cannabis Control orot lie r State agency required by law.
3.25.50 Tax Imposed.
A There is imposed upon each person who is engaged in business as a Cannabis
Business a Cannabis IIUSincssTas. Such taxis payable regardless of whether the business has
been issued a Commercial Cannabis Permit to operate Lawfully in the City or is operating
unlawfully. The City's acceptance of a Cannabis Business Tax payment From a Cannabis
Business operating illegally shall not constitute the City's approval or consent to such illegal
operations.
B The City Council may, by resolution or ordinance. set. increase or decrease
the rate of the Cannabis BUSIneJS Tax, including the initial rate of Cannabis Business 'fax,
within the minimum and maxinnun prescribed range of tax rates. Notwithstanding the
foregoing, in no event shall the City Council repeal this tax,or set any adjusted rate that is
less than the minimum rate, nor that exceeds the maximum rates calculated pursuant to this
section.
C The minimum and maximum rate of the Cannabis Business Tax shall be
calculated as f of lows:
I. ENcry person engaged in Retail sales of Cannabis and/or Cannabis
Products, including as a Retailer (dispensary) or non-storefront
Retailer(retail delivery business)shall be Suhject to up to a maxinuun
tax rate not to exceed six percent (6%) of Gross Receipts.
2. f:very person engaged in the Indoor Cultivation for Cannabis shall be
subject up to a maxinwm tax rate not to exceed one percent (1%) of
Gross Receipts.
3. Every person engaged in the operation of a Testing laboratory for
Cannabis and/or Cannabis Products shall be subject to up to a
maximum tax rate not to exceed one percent (1%)of Gross Receipts.
4. Ewcry person engaged in Distribution of Cannabis and/or Cannabis
Products shall be suhject to up to a maxinwm tax rate not to exceed one
perccnt (I'Yo)of Gross Receipts.
5. Every person engaged in Manufacturing or Processing of Cannabis
and/or Cannabis Products, or any other type of Cannabis Business not
described in Section 3.25B50 (C) (I), (2). (3), or (4) shall be subject
to up to a maximum tax rate not to exceed one percent (I%)of Gross
Receipts.
Persons subject to the Cannabis Business Tax shall register with the City and pay
13
any Ices established by die Cite Council. Such fees shall not exceed the cost of providing
the service and not be considered as a tax and may be adjusted from time to time to recover
related costs by resolution of the Cite Council.
3.25.60 Reporting and remittance of tax.
A The Cannabis Business Tax imposed by this section shall be paid,in arrears.
on it monthly basis. Bach person owing a Cannabis Business Tax each calendar month
Shall. no later than the last day of the month following the close of the calendar month,
file with the Tax Administrator it statement ('Tax Statement") of the tax owed for that
calendar month and the basis for calculating that tax. The Tax Statement is required to be
submitted on it form prescribed by the "fax Administrator. The Cannabis Business
Tax for each calendar month Shall Ix due and payable on than same date that the Tax
Statement for the calendar month is due.
13 Upon cessation of a Cannabis Business,Tax Statements and Cannabis tax
payments shall be immediately due for all calendar months up to and including the
calendar month during which cessation occurred.
C '['he Tax Administrator mav, in his or her discretion. establish alternative
reporting and payment periods for any taxpayer as the Tax Adm inistrator deems necessary
to ensure efficient and effective collection of the Cannabis Business 'fax, but no less
frequently than quarterly. The Tax Administrator may also require that a deposit, to be
applied against the Cannabis Business Taxes clue for a calendar month, be made by a
taxpayer at the beginning of that calendar month. In no event shall the deposit required
by the Tax Administrator exceed the Cannabis Business"fax amount he or she projects
Will be owed. in his or her judgment, by the taxpayer for the calendar month. The Tax
Administrator may require that a taxpayer make Cannabis Tax payments via a cashier's
check, money order, wire u-ansier,or similar instrument.
325.070 Pay ments and Coln nn Lill i Cat ions-timely rent ittanCC.
Whenever any Cannabis Tax 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 date
would fall on it Saturday, Sunday or a holiday observed by the City,tile due date shall
be the last business day of the month following the close of the calendar
month Which the City is open to the public.
325.080 Payment when taxes deemed delinquent.
Unless otherwise specifically provided under other provisions of this section.
the Cannabis Business 'faxes required to be paid pm'suant to this section shall be
deemed delinquent if not received by the Tax Administrator on or before the due date as
specified in Sections 325.060 and/or 3.25.070.
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3 25.090 Notice not required by the City.
The City may as it courtesy send it tax notice to the Cannabis Business which owes
the City it Cannabu BusincsS Tax. However. the Tax Administrator is not required to
send a delinquency or other notice or bill to any person subject to the provisKns of this
section. Failure to send such notice or hill shall not affect the validity ol'any taN or penalty
due under the provisions of thu SCCtKm.
3.25. 100 penalties and interest.
A Any person who fails or refuses to pay any Cannabis 13usincssTax required
to be paid pursuant to this section on or before the due date shall pay penalties and interest
as follows:
1. A penalty equal to ten percent (10%)of the amount of the tax due,
in addition to the amount of the tax clue,plus interest on the unpaid
tax calculated from the due date of the tax at the rate of one percent
(1.0`Yo) per month.
2. Ifthe tax remains unpaid for a period CNceeding one calendar month
beyond the due date, an additional penalty equal to twenty-five
percent (25"%)of the amount of the tax,plus interest at the rate ofone
percent (1 .0%) per month on the unpaid tax and on the unpaid
penalties.
3. Interest shall be applied at the rate of one percent (I.0%) per month
on the lirst day of the month lot- the full month and will continue
to accrue monthh, on the tax aryl penalpI until the balance is paid in
full.
6 Whenever a check or electronic payment is submitted in payment of it
Cannabis Business Tax and the payment is subscqucntly retUrned unpaid by the bank for
any reason, the taxpayer will be liable for the tax amount due plus any lees. penalties and
interest as provided for in this section, and any other amount allowed under State law.
C The City may revoke or refuse to renew the license required by Section
325.030 for any business that is delinquent in the payment of any tax due pw'Suant to this
section or that fails to make additional fee payments required by the City.
3.25.110 Refundsandcredits.
No refund shall be made of any tax collected pursuant to this sect ion,except as provided in Section
).25.120.
15
A No refuncl of any Cannabis Business Tax collected pursuant to this section
shall be made because ol'the diSCOntlnttatlOn.d issol Lit ion. or other termination ofa business.
3.25. 120 Refunds and procedures.
A Whenever the amount ofany Cannabis 13usincss'fax,penalty or interest has
been overpaid, paid more than once,or has been crroncousy, collected or received by the
City under this section, it may be refunded to the claimant who paid the tax provided that
a written claim for refund is filed with the Tax Achninist'ator within one (I) year of the
(late the tax was originally due or paid, whichever came first.
B The Tax Administrator. his or her desianee. or any other City officer
charecd with the administration of this section shall have the right to examine and audit all
the hooks and business records ol'the claimant in order to determine the eligibility of the
claimant to the claimed refund. No claim for refund shall be allowed it' the claimant
refuses to allow such exam ination ofclaimant's books and business records after request
bythel ax Administrator to do so.
C In the event that the Cannabis Business fax was erroneously paid in an
amount in excess of the tax duC.and the error is attributable to the City, the City shall refund
the amount of tax erroneously paid; provided that (i) a claim l'or refund has been timely
likd with the Tax Administrator and (ii) the rel'und cannot exceed, under anv circumstance.
the amount oftax overpaid during the twelve months preceding the List month for which the
claim states the tax was overpaid.
3.25.130 Personal cultivation nottaxed.
The provisions of this section shall not apply to personal Cannabis cultivation
or personal use of Cannabis, to the extent those activities arc authorized in the State's
"Medicinal and Adult Use Cannabis Regulation and Salety Act."as may be amended. phis
section shall not apply to personal use of Cannabis that is spec it Wally csentptcd from State
I icens ing requirements,that meets the de fin it ion of personal use or equivalent term i no logy
under State law. and provided that the individual recenyes no compensation whatsoever
related to that personal Cultivation or use.
3.25.140 Administration ofthc tax.
A Itshall be the duty ol'the Tax Administrator to collect the taxes, penalties,
fees, and perlbrm the duties required by this section.
B I�or purposes of administration and enforcement of this section generally,
the Tax Administrator may from time to time promulgate such administrative
intcrpretatio is.rules and/or procedures consistent with the purposC, intent and express
terms of this section as he or she deems necessary to implement or clarify such provisions
16
or aid in enforcement.
C The "fax Administrator may take such administrative actions as needed
to administer the Cannabis Business Tax, including but not limited to:
1. Provide to all Cannabis Business taxpayers forms for the reporting
of the tax:
2. Provide information to any taxpayer concerning the provisions of
this section:
3. Receive and record all taxes remitted to the City as provided in this
section
4. Maintain records of taxpayer reports and taxes collected pursuant to
this section:
5. Assess penalties and interest to taxpayers pursuant to this section:
6. Dctermincamounts owed underandenlirce collection pursuanttothis
sect ion.
325. 150 AppcaI procedure.
Anv taxpayer aggrieved by any decision of the "fax Administrator with respect to the
amount of tax, interest.penalties and fees, if any.due under this section may appeal to the City
Council by filing it notice of appeal with the City Clerk within thirty (30) calendar days of
the serving or mailing of the Tax Administrator's determ ination of the amount due. The City
Clerk,or his or her designee.shall fix it time and place for hearing, such appeal,and the City
Clerk.or his or her designeCshall give notice in writing to such operator at the List known
place of address. The finding of the City Council shall be final and conclusive and shall be
served upon the appellant in the manner prescribed by this section 325.150 lot- service of
notice of hearing. Any amount found to be due shall be immediately due and payable upon
the service ofthe notice.
325.160 Enforcement -actionto collect.
Any taxes. penalties and/or fees required to be paid under the provisions of this
section shall he deemed it debt owed to the City. Any person owing money to the City
under the provisions of this section shall be liable in an action hrought in the name of the
City for the recovery of such debt. The provisions of' this section shall not be deemed a
limitation upon the rieht of' the City to bring any other action including criminal. civil and
equitable actions, based upon the failure to pay the Cannabis Business Tax, penalties
and/or fees imposed by this section, or the failure to comply with any of the provisions of
this section.
3.25.170 Apportionment.
17
If a business subject to the Cannabis Business Tax is operating both within and
outside the City. it is the intent of the City to apply the Cannabis Business Tax so that the
measure of the tax fairly reflects the proportion of the lased 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 Tax
Administrator may promulgate administrative procedures for apportionment as he or she
finds useful or necessary.
325.180 Constitutionality and IcealitV.
'file Cannabis Business Tax is intended to be applied in a manner consistent with
the United States and California Constitutions and State law. intone of the tax provided
for by this section 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 or State hny. Ifa person believes that the tax. as
applied to him or her. is impermissible under applicable law, he or she may request
that the Tax Administrator release him or herf iom the obligation to pay the impermissible
portion ofthe tax.
3.30. 190 Auditandexaminationofprcmisesandrecords.
A for the purpose of ascertaining the amount of Cannabis Business Tax owed
or verification any representations made by anY taxpayer to the City in support of his or
her tax calculation. the Tax Administrator shall have the power to inspect any location
where commercial Cannabis Cultivation occurs 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 Cannabis Businesses in the City. In conducting such investigation. the Tax Administrator
shall have the power to inspect any equipment, such as but not limited to computers or
point of sale machines. that may contain such records.
B It shall be the duty of cyery person liable for the collection and payment to
the City of any Cannabis BUSlnessTax imposed by this section to keep and preserve. Ibr a
period of at least three (3) ),cars, 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 or his/her desisnce shall have the right to inspect
at all reasonable times.
C Should the Fax Administrator he required to perform an audit of the records
of any Cannabis Business for failure to tinkly or accurately report Cannabis Business
Taxes pursuant to sections 325.060 and/or 3.25.070, the entire cost of the audit shall be
assessed against the operator.
18
1.25.200 Other lice nses.perm its.taxes. fees orchitrges.
A Nothing contained in this section shall be deemed to c re ate , r c p I a c c.
amend, repeal or be in lieu of', or in any way alTect any requirements for, any
Commercial Cannabis Pcrmit or License the City may require for any purpose. In
addition. nothint-,containcd inthisscctionshall bedeemcd to create, replace, amend.
repeal or be in lice of', or in any way affect any requirements for, any tax, fee or other
charge imposed, assessed or required under arp1 other Chapter of this code or any other
ordinance or resolution olthe City.
3 25.210 Pavment oitax does not authorize unlawful business.
A The payment of a Cannabis I3usiness Tax required by this section, and as
acceptance bythc City, shall notentitle any person tocarry on anv Cannabis Business unless
the person has complied with all of this rcquircments of this code and all other applicabk
State laws.
B No tax paid under file provisions of this section shall be construed as
authorizing the conduct or continuance of anv illegal or unlawFul business. or anv hU31neS5
in violation of anv local or state law.
3.25.220 Ueficicncv determinations.
If the Tax Administrator is not satisfied that any statement tiled as required under
the provisions of this section is correct, or that the amount of Cannabis I3usiness "fax 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 (3)years of the date the tax was originally clue and payable. One
or more deficiency detcrminations of'the amount of tax due for a period or periods may
be made. Whcn a person discontinues engaging in a Cannabis I3usiness. a defiClCney
determination may he made at any time within three (3)years thereafter as to any liability
arising Iron engaging in such Cannabisl3usinesswhether or nota dclicicncy 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 Section 3.2S240.
325.230 hailurctoreport—nonpayment, fraud
A Under any of the following circumstances; the Tax Administrator may make
and give notice of'an assessment of the amount of Cannabis Business Tax owed by a person
undo' this section at any time:
1. If the person has not filed a complete statement required under
19
the provisions of this section:
2. If the person has not paid the tax duc under the provisions of
this section:
3. Ifthc person has not, after demand by the Tax Administrator,filed a
corrected stateme lit.or furnished to the Tax Administrator adequate substantiation of
the information contained in a statement already filed, or paid any additional
amount of tax duc under the provisions of this section;or
4. 11 the Tax Administrator determines that the nonpayment of any
Cannabis Business Tax duc under this section is due to fraud, a penalty of twCnq'-
five percent (25%) of the amount of the tax shall be added thereto in addition to
penalties and interest otherwise payable under this section and any other penalties
allowed by law,
B '['he notice of assessment shall separateh, set forth the amount of any tax
known by the Tax Administrator to be duc or estimated by the Tax Administrator, after
consideration of all information within the "fax Administrator's knowledge concerning the
business and activities of the person assessed. to be due under each applicable provision of this
section and shall include the amomtt of any penalties or interest accrued on each amount to die
date ofthe notice of assessment.
3.25.240 "fax assessment - notice requirements.
The notice of assessment shall be sexed upon the person either by personal
delivery. by overnight delivery bya nationally-recognized courier service, or bya 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 section; Or.Should
the person have no address registered with the Tax Administrator fix such purpose. then to
such person's last known address. For the purpose of Section 325240, a service by
overnight delivery shall be deemed to have occuned one (1) calendar day following deposit
with a courier and service by mail shall be deemed to have occurred three (3) clays following
deposit in the United States mail.
325.250 Tax assessment hearing, application and determination.
Within thirty (30) calendar days after the date of service of the notice of assessment
the person may apple in writing to the "fax Administrator for a hearing on the assessment. If
application for a hearing before the City is not made within the time herein prescribed.the
Cannabis Business Tax assessed by the Tax Administrator shall become final and
conclusnVe. Within thirty (30) calendar days of the receipt of am- such application for
hearing. the 'fax Administrator shall Cause the matter to beset for hearing before him or her
no Later than thirty (30)calendar 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
20
hearing shall he given by the Tax Adminisu'ator to the person requesting such hearing not
later than five (5) calendar clays prior to such hearing. At such hearing said applicant may
appear and offer evidence why the assessment as made by the Tax Adminisu'ator should
not be confirmed and fixed as the tax due. Aftcr such hearinethe Tax Administrator shall
detennine and reassess (if necessary) the proper tax to be chanucd and shall _give written
notice to the person in the manner prescribed in Section 3 25.240 for Living notice of
assessment.
3.25.260 Rclieffrom taxes - disaster relief.
A If a Cannabis Business is unable to oomph- with any tax requirement
imposed under this section due to a disaster. the business may notify the Tax
Administrator- of its inability to comply and request relieffrom the tax requircmcnt. For
putposes of this section. "disaster' means fire, flood. storm, tidal wave. earthquake, or
similar public calamity. whether or not resultingf-om natural Causes.
B The Cannabis Business shall provide any infonnation required by the
"fax Administrator including, without limitation, why rclicf is requested, the time period
for which the relief is rcqucstcd,and the reason rcliel' is needed lit the specific amount ol"
time. The Cannabis Business agrees to Lram the Tax Adm inisu'ator or hisihcr designee
access to the location where the Cannabis Business has been impacted due to a disaster.
C The Tax Adminisu-ator, in his/her- sole discretion, may provide rclicf from
the Cannabis Business Tax requirement for businesses whose operations have been
mpacted by a disaster il' such tax rclicf does not exceed liftecn thousand ($I5.000)
dollars. Such temporary relicf'may be granted for-a reasonable amount ol'timc,in the "fax
Administrator's sole discretion. and the amount and duration ofrcliefshould be based upon
how Ion,- awould reasonably take for the Cannabis Business to recover from the disaster.
FLIFOIC1% the Tax Adminsu'ator may require that the Cannabis Business follow certain
conditions to receive temporary relief from the Cannabis I3usincssax requirement.
325270 Conviction for violation -taxes not .vaived.
"Fhe conviction and punishment of any person for failure to pay the required
Cannabis Business Tax shall not excuse or exempt such person from any civil action for
the tax debt unpaid at the time ohsuch conviction. No civil action shall present a criminal
prosecution for any violation ofthc provisions of this section or-ofany State law requiring
the payment of all taxes.Any person violating any of'the provisions of this section shall
be guilty ofa misdemeanor-.
325.280 Severability.
If any provision of this section,or- its application to any person or circumstance.
is detennined by a court of competent jurisdiction to be unlawful unenforceable or-
other-wise void, that determination shall have no effect on any other provision of this
21
section or the application of this section to any other person or circumstance and. to
that end, the provisions hercofare severable.
3 25 290 Remedies cumulative.
All remedies and penalties prescribed by this section or which are available under
any other provision ofthis code and any other provision of law or equity are cumulative.
'['he use of one or more remedies by the Citv shall not bar the use of any other remedy for
the purpose ofenforcingtile provisions ofthis section.
3.25.300 Amendment or modification.
1=xccpt as set forth in this section 3 25.310. thLs section shay be amended or
modified but not repealed by the City Council without a vote ol' the people. However.
as required by Article \III C of the California COnslilUllOn, voter approval is required
for any amendment that would expand. extend. or increase the rate of any tax levied
pwsuant to this section. The pcoplc of the City of' I-luntington Beach affirm that the
following actions Shall not constitute an increase of the rate of a tax:
A The restoration or adjusunent ol'the rate of the tax to it rate that is neither less
not higher than that allowed by this chapter,in those circumstances where. anhong others.
the City Council has previously acted to reduce or increase the rate of the tax within the
allowed range or is incrementally implementing an increase authorized by this chapter:
B An action that interprets or clarifies (i) the nhethodology of applying or
calculating the Cannabis Business Tax or (ii) any definition applicable to the tax. so bm
as the interpretation or clarification (even if contrary to some prior interpretation or
clarification) is not inconsistent with the provisions ofthis Chapter 325: or
C The collection of the tax imposed by this section even if the Cit_v had. for
some period of time. failed to collect the tax.
SI'CTIO\I 2. Pursuant to Article \III 1.3 of the California Constitution. the appropriation
limit for the City of 1-1Untingtoil Beach will be increased by the maxintuun projected
aggregate collection authorized by the levy of this general tax. as indicated in Section I,
in each of the years covered by this Ordinance plus the amount, if any, by which the
appropriation limit is decreased by law as a result of the levy of the general tax set forth in
this Ordinance.
SL:CTION 3. It' any portion of this Ordinance is declared invalid by it court of bw or
other- legal body with applicable authority, the invalidity shall not affect or prohibit the
force and effect of any other provision or application of the Ordinance that is not deemed
invalid. The voters ofthe City hereby declare that they would have circulated for qualification
and/or voted for the adoption of this Section. and each portion thereof. regardless of the
22
fact that amp portion of the initiative may be Subsequently deemed invalid.
SECTON a. Pm-suant to California Constitution Article SIIIC y(2)(b) and California
Elections Codc §9217. this Ordinance shall take effect only if approved by a majority of
the cIiaible voters of the City of Huntington Beach voting at the General NlunicipaI Election
to be held on November S. 2022, and shall take clfect ten (10)days after the City Council
has cerlilicd the results of the General N9unicipal Election by resolution.
SECTION 5. This order shall take e1Tect according to law ten days after certification of
the election at which it is adopted.
23
ATTACHMENT # 1
RESOLUTION NO. 2022-07
A RL'•SOLUTiON OF THE CITY COUNCIL OF THE CITY OF HUNIINGTON BEACH
CALLING FOR A MUNICIPAL ELECTION FOR THE PURPOSE OF SUBMITTING TO
THE VOTERS OF THE CITY OF HUNTINrGTON BEACH A PROPOSED.ORDINANCE
ADDING CHAPTER 3.25 TO TITLE 3 OF THE HUNi-IN'GTON BEACH MUNICIPAL
CODE, ESTABLISHING .A SPECIAL TAX ON CANNABIS BUSINESSES OPERATING
WITFIIN THE CITY OF i-iUNTNGTON BEACH; REQUESTING CONSOLIDATION OF
THIS ELECTION WITH THE JUNE 7, 2022 STATEWIDE PRIMARY ELECTION AND
EEQUESTING ELECTION SERVICES FROM 1-FIE COUNTY OF ORANGE TO
CONDUCT SAID ELECTION; AND SETTING RULES AND DEADLINES FOR
ARGUMENTS AND REBUTTALS FOR AND AGAINST THE ORDiANCE.
WHEREAS, pursuant to California Government Code Sections 371005 and 37101, the
City of Huntington Beach has the authority to establish a local business tax upon
cannabis/marijuana businesses that engage in business'in the City; and
i
WHEREAS, pursuant to Section 9222 of the California Elections Code, the City
Council has authority to place propositions on the ballot to be considered at the Municipal
Election; and
WHEREAS, the City Council desires to submit to the voters an ordinance establishing
both (i) a not to exceed rate of 6% Iocal'special tax on the gross receipts received by any
cannabis retail business and (ii) a not-to-exceed rate of 1% local special tax on any other
cannabis business including but not limited to indoor cultivation, manufacturing, testing labs,
and distribution; and
WHEREAS, the proposed cannabis business tax is a special tax, the proceeds of which
would be deposited into the City special fund for police services for public safety and
behavioral health and hon eless prevention and intervention programs and services; and
A
WHEREAS, on/November 6, 1996, the voters of the State of California approved
Proposition 218 (California Constitution, Article XIIIC), an amendment to the State
Constitution which lrequires that all special taxes which are imposed, extended or increased
must be submitted/to the electorate and approved by a 2/3 vote of the qualified electors voting
in the election: and
WHEIEAS, the proposed ordinance would establish a special tax which is subject to
Proposition/218: and
WHEREAS, pursuant to Proposition 218 (California Constitution Article XII1C),
§2(b))/the general rule is a special tax may be consolidated with a regularly scheduled primary
election: and
// WHEREAS, the next regularly-scheduled Statewide primary election is set for June 7,
2022: and
RESOLUTION NO. 2022-07
WHEREAS, the City Council also desires to request that the Orange County Registrar
of Voters provide full election services to the City in order to conduct a Special Municipal
Election for the Ordinance/Measure described herein to be held and consolidated with the
Statewide Primary Election on June 7. 2022; and
i
WHEREAS, the City Council also desires to establish deadlines and,rules for the
submission of written arguments and rebuttals for and against the Ordinance in accordance
with applicable California Elections Code procedures; and j
i
WHEREAS, the specific terms relating to the cannabis business tax are provide for in
the ordinance to be considered by the qualified voters, attached hereto as Exhibit 1 (the
"Ordinance" or "Measure") and by this reference made an operative part hereof, and in
accordance with all applicable laws.
NOW. THEREFORE, THE CITY COUNCIL OF THE CITY OF HUNTINGTON
BEACH, CALII=ORNIA, DOES RESOLVE, DECLARE, DETARNIENE, AND ORDER AS
FOLLOWS:
SECTION 1. Recitals. The City Council hereby finds and determines that the foregoing
recitals are true and correct, are incorporated herein and by this reference made an operative
part thereof.
SECTION 2. Submission of Ballot Measure. The City Council of the City pursuant to its
right and authority as contained in Government Code Section 37100.5 and Elections Code
Section 9222 and consistent with the'requirements California Proposition 213 hereby orders
the Ordinance attached hereto as Exhibit 1 be submitted to the qualified voters of the City at
the Statewide Primary Election to be held on June 7, 2022. The proposed Ordinance shall be
in the form attached hereto as Exhibit 1 to this Resolution and incorporated by this reference as
if fully set forth herein.
SECTION 3. Ballot Measure. The City Council, pursuant to its right and authority, does
hereby order that the Measure shall be presented and printed upon the ballot submitted to the
qualified voters in the'Manner and form set forth in this Section 3. On the ballot to be
submitted to the qualified voters at the Statewide Primary Election to be held on June 7, 2022,
in addition to any,other matters required by law, there shall be printed substantially the
following:
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7
RESOLUTION NO. 2022-07
Measure_: The City of Huntington Beach Retail Cannabis Tax Measure
Shall the City adopt a special tax measure of up to 6% of gross
receipts on cannabis retailers and up to 1% of gross receipts on all YES
other cannabis businesses, which is expected to generate an estimated .'
5300,000 to $600,000 annually for the specific purposes of funding
police and homeless and behavioral health services, and levied until'
terminated by voters? NO
SECTION 4. Election Procedures.
A. The ballots to be used at the election shall be in the form and content as required by
law.
B. In accordance with Section 10403 of the Elections Code, the Board of Supervisors of
Orange County is hereby requested to consent to the consolidation of a Special
Municipal Election with the Statewide Primary Election on June 7, 2022, with the
election to be held and conducted in the manner prescribed by Election Code Section
10418 for the purpose of submitting the voters of the City of Huntington Beach a
question relating to the adoption of the proposed ordinance-
C. In addition, in accordance with Section 10002 of the Elections Code, the Board of
Supervisors, is hereby requested to consent to having the County Election
Department/Registrar of Voters render full election services to the City of Huntington
Beach as may be requested by the City Clerk of said City, the County of Orange to be
reimbursed in full for services as are performed.
D. The full election services which the City of Huntington Beach requests the Registrar of
Voters. or such other official as may be appropriate, to perform and which such officer
is hereby authorized and directed to perform if said Board of Supervisors consents.
include the preparation, printing and mailing of sample ballots: the establishment or
appointment of vote centers, and election officers, the preparation, printing, mailing
and furnishing of'vote-by-mail ballots, making such publications as are required by law
in connection therewith; the furnishing of ballots, voting booths and other necessary
supplies or materials for polling places: the canvassing to the City Clerk of the City of
Huntington Beach: and the performance of such other election services as may be
requested by the City Clerk.
E. The City Clerk is authorized, instructed and directed to procure and furnish, or cause to
be procured and furnished through the County of Orange, any and all official ballots,
notices, printed matter and all supplies, equipment and paraphernalia that may be
necessary in order to properly and lawfully conduct the election.
3
RESOLUTION NO. 2022-07 /
F. in all particulars and recited in this Resolution, the election shall be held and conducted
as provided by law for holding municipal elections in the City. i
G. Notice of the time and place of holding the election is given and the City Clerk is
authorized, instructed and directed to give further or additional notice of the election, in
time, form, and manner as required by Elections Code Section 12111 and all other
applicable laws. %
H. All ballots shall be tallied in a manner that complies with all applicable laws and as
designated by the Registrar of Voters. ;
i. The Orange County Registrar of Voters is hereby autli orized to canvass the returns of'
said election. j
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J. The City Clerk of the City of Huntington Beach shall receive the canvass from the
County as it pertains to the election on the measure, and shall certify the results to the
City Council, as required by law.
SECTION 5. Arguments and Impartial Analysis/
A. The City Council authorizes (i) the City Council or any member(s) of the City Council,
(ii) any individual voter eligible t9 vote on the above measure, (iii) a bona fide
association of such citizens or (iv) any combination of voters and associations to file a
written argument in favor of or against the City measure, in accordance with Article 4,
Chapter 3, Division 9 of the),-Elections Code of the State of California and may change
the argument until and including March 16, 2022 by 5:30 p.m. after which no
arguments for or againsyhe measure may be submitted to the City Clerk. Arguments
in favor of or against the measure shall each not exceed 300 words in length. Each
argument shall be filed with the City Clerk, signed and include the printed name9s) and
signature(s) of the author (s) submitting it, or if submitted on behalf of an organization,
the name of the greanization, and the printed name and signature of at least one of its
principal officefs who is the author of the argument.
B. The City C rk shall comply with all provisions of law establishing priority of
argurten for printing and distribution to the voters, and shall take all necessary
actions o cause the selected arguments to be printed and distributed to the voters.
C. Pur ant to Section 9280 of the Elections Code, the City Council directs the City Clerk
to ransmit a copy of the measure to the City Attorney. The City Attorney shall prepare
n Impartial Analysis of the measure, not to exceed 500 words in length, showing the
effect of the measure on the existing law and the operation of the measure. The City
Attorney shall transmit such Impartial Analysis to the City Clerk, who shall cause the
analysis to be published in the voter information guide along with the ballot measure
and provided by law. The Impartial Analysis shall be filed by the deadline set for
filing of primary arguments as set forth in subsection (A) above. The Impartial
4
RESOLUTION NO. 2022-07
Analysis shall include a statement indicating whether the measure was placed on the f'
ballot by a petition signed by the requisite number of voters or by the City Council.,'
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D. That the provisions of this Section 5 herein shall apply only to the election to.be held
on June 7, 2022, and shall then be repealed.
SECTION 6. Rebuttals '
i
A. Pursuant to Section 9285 of the Elections Code of the State of California when the
City Clerk has selected the arguments for mid against the various City initiated
measures which will be printed and distributed to the voter. The City Clerk shall
send copies of the argument in favor of the measures to,the authors of the argument
against and copies of the argument against to the authors of the argument in favor.
The authors or persons designated by them may prepare and submit rebuttal
arguments not exceeding 250 words. The rebuttal arguments shall be filed with the
City Clerk no later than Ivlarch 26, 2022 by 5:30 p.m. Rebuttal arguments shall be
printed in the same manner as the direct arguments. Each rebuttal argument shall
immediately follow the direct argument which seeks to rebut.
B. The provisions of this Section 6 herein shall apply only to the election to be held on
June 7, 2022, and shall then be repealed.
SECTION 7. Placement of the Ballot. ;The full text of the Ordinance/Measure shall not be
printed in the voter information guide,'/and a statement shall be printed in the ballot pursuant to
Section 9223 of the Elections Code,advising voters that they may obtain a copy of this
Ordinance/Measure at no cost, n request made to the City Clerk.
SECTION 8. Delivery of Resolution to the County. The City Clerk shall certify to the
passage and adoption of this'Resolution and eater it into the book of original resolutions. The
City Council directs the City Clerk to deliver copies of this Resolution, including the
Ordinance/Measure attached hereto as Exhibit 1, to the Clerk of the Board of Supervisors of
Orange County and to,& Registrar of Voters of Orange County, no later than March 11, 2022.
SECTION 9. Public Examination. Pursuant to California Elections Code Section 9295, this
Measure will be available for public examination for no fewer than ten (10) calendar days prior
to being submitted for printing in the voter information guide. The City Clerk shall post notice
in the City Clerk's office of the specific dates that the examination period will run.
SECTION 10. CEQA. The City Council hereby finds and determines that the ballot measure
related to organization or administrative activities of governments that will not result in direct
or indiiect physical changes in the environment, and therefore is not a project within the
meaning of the California Environmental Quality Act ("CEQA") and the State CEQA
guidelines, Section 15378(b)(5). This ballot measure is also exempt from CEQA review
pursuant to Business & Professions Code Section 26055(h) because any subsequent ordinance
adopted by the City Council permitting cannabis businesses will require environmental review
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5
RESOLUTION NO. 2022-07
prior to any decision relating to the issuance of a permit or other authorization for the c r tabis
business to commence operations.
SECTION 11. Severability. If any provision of this Resolution or the application thereof to
any person or circumstance is held invalid, such invalidity shall not affect other'provisions or
application, and to this end the provisions of this Resolution are severable. The City Council
hereby declares that it would have adopted this Resolution irrespective of.the invalidity of any
particular portion thereof.
SECTION 12. Council will designate a subcommittee to draft an argument on Council's
behalf, or designate specific Council Members to draft an argument under their names. In the
event such a Council authorized argument is not prepared, individual voters (including
Council Members) can submit an argument, and a priority is set forth by Election Code
Section 9287 to be applied by the City Clerk in selecting the ballot argument to use.
SECTION 13. Effective Date of Resolution. This Resolution shall take effect immediately
upon its adoption. j
PASSED AND ADOPTED by the Cit} Council of the City of Huntington Beach at a
regular meeting thereof held on the day of 20_
Mayor
ATTEST: APPROVED AS TO FORM:
City Clerk City Attorney �r1
RE EVED AN APPROVED: INITIATED AND 1APPROVED:
- anager I
Assi� stant City 11-ta!ge
6
RESOLUTION NO. 2022-07
EXHLBIT I
COUNCIL-SPONSORED INITIATIVE MEASURE TO BE SUBMITTED DIRECTLY
TO THE VOTERS
The City Council for the City of Huntington Beach submits the following
measure to the voters of the City for approval and enactment:
1
ORDINANCE NO. 22-XX
AN ORDINANCE OF THE PEOPLE OF THE CITY OF
i-IUNTINGTON BEACH, CALIFORNIA, ADDING CHAPTER 3 25
•I,O TITLE 3 OF THE HUNTINGTON BEACH MUNICIPAL CODE
ESTABLISHING TAXES ON CANNABIS BUSINESSFS
OPERATING WITHIN THE CITY OF HUNfINGTOiN BEACH
The People of the City of Huntington Beach ordain as follows:
SECTION 1. Subject to the approval of a hvo-thirds of the voters of the City of
Huntington Beach atthe Municipal Electionso designated by the City Council in a
separate resolution placingthe proposal on the ballot for such election,Chapter 325 is
hereby added to Title 3 of the Huntington Beach Municipal Code to read as follows:
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Chapter 3.25 CANNABIS BUSINESS/TAX
i
3.25.010 Title
3.25.020 Authority and.purpose
3.25.030 Intent
3.25.040 Definitions
3.25.050 Tax Imposed
3.25.060 Reporting and remittance of tax
3.25.070 Payments and communications— timely remittance
3.25.080 Payment— when taxes deemed delinquent
1.25.090 Notice not required by City
3.25.100 Penalties and interest
3.25.110� Refunds and credits
3.25.120 Refunds and procedures
3.25.136 Personal cultivation not taxed
3.25,.,140 Administration of the tax
r
3.25.150 Appeal procedure
3 25.160 Enforcement—action to collect
/3.25.170 Apportionment
325.180 Constitutionally and legality
3.25.190 Audit and examination of premises and records.
3.25.200 Other license, permits, taxes, fees or changes
/ 7
RESOLUTION NO. 2022-07
3.25.210 Payment of tax does not authorize unlawful business f
3.25.220 Deficiency determinations f
3.25.230 Failure to report— nonpayment, fraud
3?5?40 Tax assessment— notice requirements
3.25.250 Tax assessment — hearing, application and determination
3.25.260 Relief from taxes—disaster relief
3 25.270 Conviction of violation —taxes not waived %
3.25.280 Severability
3,25,290 Remedies cumulative f`
3.25.300 Amendment or modifications %
3.25.010 Title:
/
This ordinance shall be known as the Cannabis Business Tax'.
Ordinance.
3.25.020 Authority and Purpose.
The purpose of this Ordinance is to adopt a special tax, for review purposes, pursuant
to Sections 37101 and 37100.5 of the California Government Code, upon cannabis businesses
that engage in business in the City of Huntington Beach/("City"), the Cannabis Business Tax
is levied based upon business gross receipts. It is not,a sales and use tax, a tax upon income,
or a tax upon real property.
The Cannabis Business Tax is a special to enacted solely for the special purpose of
supporting the City's (a) police services for public safety and, and (b) behavioral health and
homeless prevention and intervention programs and services. All of the proceeds from the
tax imposed by this section shall be placed ina Special Fund and be available only for the
identified purpose.
3.25.030 Intent.
The intent of this Ordinance is to levy a tax on all cannabis businesses that operate
in the City, regardless of whether conducting such business within the City would have been
legal at the time this section was adopted. Nothing in this section shall be interpreted to
authorize or permit any business activity that would not otherwise be legal or permissible in
the City under laws applicable to the activity at the time the activity is undertaken.
3.25.040 Definitions.
The following words and phrases shall have the meanings set forth below when used in
this section:/
"B /ess" shall include all activities engaged in, or caused to be engaged in, within the
City, i cluding any commercial or industrial enterprise, trade, profession, occupation,
voc on, calling or livelihood, whether or not carried on for gain or profit, but shall not
in ude services rendered by an employee to his or her employer.
8
RESOLUTION NO. 2022-07
"Business" shall include 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 i 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" also means the
separated resin, whether crude or purified, obtained from cannabis./"Cannabis" shall not
include "industrial hemp," unless otherwise specified.
"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 in Section 11018.1 of
the California Health and Safetv Code and is not limited to medicinal cannabis products.
"Cannabis Business" means anv business activity involving cannabis or industrial hemp,
including but not limited to cultivating, transporting, distributing, manufacturing,
compounding, converting, processing, preparing, storing, packaging, delivering, testing,
dispensing, retailing and wholesaling of cannabis, cannabis products, industrial hemp,
industrial hemp products or of ancillary products and accessories, whether or not carried on
for gain or profit. j
"City" means the City of Huntington Beach.
i
"Cannabis Business Tax" or`'Business Tax," means the taxes due pursuant to this
Chapter for engaging in a Cannabis Business in the City.
"Commercial Cannabis Cultivation" means cultivation of Cannabis undertaken in the
course of conducting a Cannabis Business.
"Commercial Cannabis Permit" means a permit issued by the City to a person to
authorize that person to operate a Cannabis Business or engage in business as a Cannabis
Business within the Citv.
"Cultivation" means any activity involving the planning, growing, harvesting, drying,
curing, grading, or trinnming of cannabis and includes, but is not limited to, the operation of
indoor, outdoor, mixed light, or nurscry. Al] outdoor or mixed light cultivation shall be
prohibited in the City.
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,,"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
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9
RESOLUTION NO. 2022-07
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.
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"Engaged in business as a cannabis business" means the commencing, conducting,
operating, managing or carrying on of a cannabis business, whether done as owner, of 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:
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 persons employee regularly conducts solicitation of business within the
1
City; or j
5. Such person or person's employee per work or renders services in the Citv.
The foregoing specified activities shall not be a limitation on the meaning of"engaged in
business."
"Distribution" means business activities that engages in the procurement, sale, and
transport of cannabis and cannabis'products between other licensed cannabis businesses.
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"Evidence of doing business means evidence such as, without limitation, use of signs,
circulars, cards or any other ddvertising 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 cannabis business in the City.
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"Gross Receipts;" except as otherwise specifically provided, means, whether designated a
sales price, royalty%rcnt, slotting fee, commission, dividend, or other designation, the total
amount (me u ing 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 tine 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;
10
RESOLUfION NO. 2022-07
2. Any tax required by law to be included in or added to the purchase price and collected f
from the consumer or purchaser; i
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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 located in the City or if authorized by the Tax Administrator in writing in accordance
with section 3.25.140 (B);
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 who le 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;
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 Tax Administrator 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 agentor trustees.
9. Retail sales of 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 3.25.140 shall not be
subject to the cannabis business tax under this section.
"Indoor CLilsation ' means the cultivation of cannabis inside a permanent enclosed
building or structure.
"Lighting" means a source of light that is primarily used for promoting the biological
processyf plant growth. Lighting does not include sources of light that primarily exist for the
safety or convenience of staff or visitors to the facility, such as emergency lighting, walkway
lightiz�g; or light admitted via small skylights, windows or ventilation openings.
"Manufacturing ' means the production, preparation, propagation, or compounding of
annabis or Cannabis products either directly or indirectly or by extraction methods; or
11
RESOLUTION NO. 2022-07
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 �F
labels or relabels their containers. %
"Person" means an individual, firm, partnership,joint venture, association; corporation,i
limited liability company; estate, trust, business trust, receiver, syndicate, or any other group or
combination acting as a unit, whether organized as a nonprofit or for-profit entity, and includes
the plural as well as the singular number.
"Processing" means a cultivation site that conducts only trinuning, drying, curing,
grading, packaging, or labeling of cannabis, industrial hemp and non-manufactured cannabis
products. i
"Retail; Retailer, or Retail Facility" means a licensed premises where cannabis, cannabis
products, or devices for the use of cannabis or cannabis products are offered, either
individually or in anv combination for retail sale. including an establishment that delivers
cannabis or cannabis products as part of a retail sale. '
"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, 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, but
does not include the return of cannabis, cannabis products, industrial hemp and/or industrial
hemp products to the licensee from whom the cannabis. cannabis product, industrial hemp
and/or industrial hemp product was purchased.
"State" means the State of California.
"State license." "license," or "registration" means a State license issued pursuant to
California Business & Professions Code Section 26050, and all other applicable State laws,
required for operating a cannabiss business.
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"Tax Administrator" means the City Manager of the City of Huntington Beach or his or
her designee.
"Testing Laboratory" means a cannabis business that (i) offers or performs tests of
cannabis, cannabis products, industrial hemp and/or industrial hemp products, (ii) offers no
service other than such tests, (iii) sells no products, excepting only testing supplies and
materials, (iv) is accredited by an accrediting body that is independent from all other persons
involved in the cannabis industry in the State, and (v) is licensed by the State Bureau of
Cannabis Control or other State agency required by law.
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RESOLUf10N NO. 2022-07
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"Distribution" means business activities that engages in the procurement, sale, and /
transport of cannabis and cannabis products between other licensed cannabis businesses.
"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 cannabis business inthe City.
"Gross Receipts," except as otherwise specifically provided, means, whether
designated a sales price, royalty, rent, slotting fee, 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 comiection with
the sale of eoods,wares,merchandise or noQ,without and 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:
I. 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:
J
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 located in the City or if authorized by the "Fax Administrator in
writing in accordance with section 325.140 (B);
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
13
RESOLUTION NO. 2022-07
r,.
dollar:
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 Tax Administrator 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.
9. Retail sales of t-shirts, sweaters, hats, stickers, key chains...-bags, books,
posters, rolling papers, cannabis accessories such as pipes;pipe screens,
vape pen batteries (N ithout cannabis or industrial hemp);olr other personal
tangible property which the Tax Administrator has excluded in writing by
issuing an administrative ruling per Section 325.1,40 shall not be subject
to the cannabis business tax under this section.
"Indoor Cultivation" means the cultivation of cannabis inside a permanent enclosed
building or structure.
"Lighting" means a source of light that is pritarily used for promoting the biological
process of plant growth. Lighting does not include sources of light that primarily exist for
the safety or convenience of staff or visitors to/the facility, such as emergency lighting,
walkway lighting,or light admitted via smalskylights,windows or ventilation openings.
i
\4anufacturing" 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 sN nthesis, 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 their,containers.
"Person" means an 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, whether organized as a nonprofit or for-
profit entity, and includesihe plural as well as the singular number.
"Processing" Zans a cultivation site that conducts only trimming, drying, curing,
grading, packaging or labeling of cannabis, industrial hemp and non-manufactured
cannabis products/
i
"Retail/Retailer, or Retail Facility" means a licensed premises where cannabis,
cannabis products, or devices for the use of cannabis or cannabis products are offered, either
individually or in any combination for retail sale, including an establishment that delivers
cannabis o r cannabis products as part of a retail sale.
14
RESOLUTION NO. 2022-07
1
"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. 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, but
does not include the return of cannabis, cannabis products, industrial hemp and/or/
industrial hemp products to the licensee from whom the cannabis, cannabis product,
industrial hemp and/or industrial hemp product was purchased.
"State" means the State of California.
i
"State license," "license,"or "registration" means a State license issued pursuant to
California Business& Professions Code Section 26050, and all other'applicable State laws,
required for operating a cannabis business.
i/
"Tax Administrator" means the City Manager of the Cityof Huntington Beach or his or
her designee. /'
'Testing Laboratory" means a cannabis business that (i) offers or performs tests of
cannabis, cannabis products,industrial hemp and/ojiindustrial hemp products, (ii)offers no
service other than such tests, (iii) sells no products,excepting only testing supplies and
materials, (iv) is accredited by an accrediting body that is independent from all other
persons involved in the camnabis industry in the State. and (v) is licensed by the State
Bureau of Cannabis Control or other State agency required by law.
3.25.050 Tax Imposed. f
A. There is imposed upon each,4 son who is engaged in business as aCannabis
Business Tax. Such tax is payable regardless of whether the business has been issued a
Commercial Cannabis Permit to/operate lawfully in the City or is operating unlawfully. The
City's acceptance of a Cannabi�,Business Tax payment from a Cannabis Business operating
illegally shall not constitute the City's approval or consent to such illegal operations.
B. Pursuant to State law, the City Council may, by resolution or ordinance, set, increase or
decrease the rate of the annabis Business Tax, including the initial rate of Cannabis Business
Tax. within the minim m and maximum prescribed range of tax rates, and establish a class of
persons that is exenyt or excepted from the tax or discontinue any such exemption or
exception. Notwithstanding the foregoing, in no event shall the City Council repeal this tax, or
set any adjusted rate that is less than the minimum rate, nor that exceeds the maximum rates
calculated pursuant to this section.
C. The a m ium rate of the Cannabis Business Tax shall be calculated as follows:
1. Every person engaged in retail sales of cannabis and/or cannabis products.
including as a retailer (dispensary)or non-storefront retailer (retail delivery
business) shall be subject to up to a maximum tax rate not to exceed six
15
f
RESOLUTION NO. 2022-07
J ..
percent (6%) of gross receipts.
2. Every person engaged in the indoor cultivation for cannabis shall be subject up
to a maximum tax rate not to exceed one percent (1%) of gross receipts_'
3. Every person engaged in the operation of a testing laboratory for cannabis
and/or cannabis products shall be subject to up to a maximum tax rate not to
exceed one percent (1%)of gross receipts.
4. Every person engaged in distribution of cannabis and/or cannabis products shall
be subject to up to a maximum tax rate not to exceed one percent (1%)of' gross
receipts.
5. Every person engaged in manufacturing or processing ofcannabis and/or
cannabis products, or any other type of cannabis business not described in
Section 3.25.050 (C) (1), (2), (3), or (4) shall be subject to up to a
maximum tax rate not to exceed one percent (1%)of gross receipts.
Persons subject to the Cannabis Business Tax shall register with the City and pay
any fees established by the City Council. Such fees shall not exceed the cost of providing
the service and not be considered as a tax and may be adjusted from time to time to recover
related costs by resolution of the City Council.,
3.25.060 Reporting and remittance of tax.' /
A. The Cannabis Business/Tax imposed by this section shall be paid,in
arrears, on a monthly basis. Each person owing a Catmabis Business Tax each calendar
month shall, no Inter than the lastfday of the month following the close of the calendar
month, file with the Tax Administrator a statement ("Tax Statement") of the tax owed for
that calendar month and the basis for calculatingthat tax. The "fax Statement is required to
besubmitted on a form prescribed by the Tax Administrator. The Cannabis Business
Tax for each calendar month shall be due and payable on that same date that the Tax
Statement for the calendar month is due.
13. Upon cessation of a Cannabis Business,Tax Statements and cannabis tax
payments shall be iminediatel} due for all calendar months up to and including the
calendar month during which cessation occurred-
C. T11e Tax Administrator may, at his or her discretion, establish
alternative reporting and payment periods for any taxpayer as the Tax Adm inistrator
deems necessary to ensure efficient and effective collection ofthe cannabis business tax,but
no less frequently than quarterly. The Tax Administrator may also require that a deposit, to
be appliedagainst the Cannabis Business Taxes due for a calendar month, be made by
a taxpayer at the beginning of that calendar month. In no event shall the deposit
requir�d by the Tax Administrator exceed the Cannabis Business Tax amount he or she
pr4cts will be owed, in his or herjudgment, by the taxpayer for the calendar month.
16
RESOLUTION NO. 2022-07
The Tax Administrator may require that a taxpayer make Cannabis Tax payments via a
cashier's check,money order, Nvire transfer,or sunilar instrument. /
3.25.070 Payments and communications — timely remittance. r f.
,i
Whenever any Cannabis Tax payment, statement, report, request or other ell
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 date would fall on
a Saturday, Sunday, or a holiday observed by the City; the due date shall be the last business
day of the month following the close of the calendar month which the City is open to the
Public
3.25.050 Payment when taxes deemed delinquent. f'
Unless otherwise specifically provided under other provisions of this section, the
Cannabis Business Taxes required to be paid pursuant to this section shall be deemed
delinquent if not received by the 'Fax Administrator on or before the due date as specified in
Sections 3.25.060 and/or 3.25.070.
3.25.090 Notice not required by the City.
r
The City may as a courtesy send a tax notice to the Cannabis Business which owes the
City a Cannabis Business Tax. However, the "fax Administrator is not required to send a
delinquency or other notice or bill to any person subject to the provisions of this section.
Failure to send such notice or bill shall not affect the validity of any tax or penalty due under
the provisions of this section.
.5.25.100 Penalties and interest.
3.25.100 Penalties and interest.
A. Any person who fails or refuses to pay any Cannabis Business Tax required
to be paid pursuant to this section on or before the due date shall pay penalties and interest
as follows:
1_ A penalty equal to ten percent (10%) of the amount of the tax due, in
addition to the amount of the tax due, plus interest on the unpaid tax calculated
from the due date of the tax at the rate of one percent (1.0%) per month.
2. If the tax remains unpaid for a period exceeding one calendar month
beyond the due date, an additional penalty equal to twenty-five percent (25%) of
the amount of the tax; plus interest at the rate of one percent (1.0%) per month on
the unpaid tax and on the unpaid penalties.
3. Interest shall be applied at the rate of one percent (1.0%) per month
fon the first day of the month for the full month and will continue to accrue monthly
17
RESOLUTION NO. 2022-07
on the tax and penalty until the balance is paid in full.
B. Whenever a check or electronic payment is submitted in payment'of a
Cannabis Business Tax and the payment is subsequently returned unpaid by,the bank for
any reason, the taxpayer will be liable for the tax amount due plus any fees, penalties and
interest as provided for in this section, and any other amount allowed under State law.
i
C. The City may revoke or refuse to renew the license feqUired by Section
3.25.030 for any business that is delinquent in the payment of any tax due pursuant to this
section or that fails to make additional fee payments required by the City.
3.23.1 1 Refunds and credits.
i
A. No refund shall be made of any tax collected pursuant to this section,
except as provided in Section 3.25.120. j
B. No refund of any Cannabis Business Tax collected pursuant to this
section shall be made because of the discontinuation, dissolution, or other termination of
a business. i
3.25.120 Refunds and procedures.
i
A. Whenever the amount of any Cannabis Business Tax, penalty or interest has
been overpaid, paid more than once, or has been erroneously collected or received by the
City under this section, it may Ue refunded to the claimant who paid the tax provided that
a written claim for refund is filed with the Tax Administrator within one (1) year of the
date the tax was originally due or paid, whichever came first.
B. The Tax Administrator, his or her designee, or an}, other City officer
charged with the administration of this section shall have the right to examine and audit all
the books and busines's 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.
l(
C. ;'In the event that the Cannabis Business Tax was erroneously paid in an
amount in excess of the tax due, and the error is attributable to the City, the City shall
refund the amount of tax erroneously paid; provided that (i) a claim for refund has been
timely filed with the Tax Administrator, and (ii) the refund cannot exceed, under any
circumstance, the amount of tax overpaid during the twelve months preceding the last
month'/for which the claim states the tax was overpaid.
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/ 18
RESOLUTION NO. 2022-07
3.25.130 Personal cultivation not taxed.
The provisions of this section shall not apply to personal cannabis cultivation or..
personal use of cannabis, to the extent those activities are authorized in the State's z
"Medicinal and Adult Use Cannabis Reeulation 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. /
3.25.140 Administration of the tax.
/
A. It shall be the duty of the Tax Administrator to collect the taxes, penalties,
fees, and perform the duties required by this section-
B. For purposes of administration and enforcement of this section generally,
the Tax Administrator may from time to time promulgate such administrative
interpretations, rules and/or procedures consistent wiih the purpose, intent and express
terms of this section as he or she deems necessarvrto implement or clarify such
provisions or aid in enforcement. '
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i�
C. The 'Fax Administrator may take such administrative actions as needed to
administer the Cannabis Business Tax, including but not limited to:
1. Provide to all Cannabis Business taxpayers forms for the reporting
Of the tax; /'
2. Provide information to any taxpayer concerning the provisions of
this section;/
3. Receive and record all taxes remitted to the City as provided in this
section;/
4. Maintain records of taxpayer reports and taxes collected pursuant
tothis section:
5. Assess penalties and interest to taxpayers pursuant to this section;
6. Determine amounts owed under and enforce collection pursuant to
//this section.
3.25.150 Appeal procedure.
Any ta��lpayer aggrieved by any decision of the Tax Administrator with respect to the
amount of tart, interest, penalties and fees, if any, due under this section may appeal to the City
Council by filing a notice of appeal with the City Clerk within thirty (30) calendar days of the
serving omailing of the 'Fax Administrator's determination of the amount due. The City
Clerk. his or her designee, shall fix a time and place for hearing such appeal, and the City
Clerk or his or her designee, shall give notice in writing to such operator at the last known
pla of address. The finding of the City Council shall be final and conclusive and shall be
sen ed upon the appellant in the manner prescribed by this section 3.25.150 for service of
177
19
RL-SOLUTION NO. 2022-07
r'
notice of hearing. Any amount found to be due shall be immediately due and payable upon the
service of the notice.
3.25.160 Enforcement— action to collect.
yr
Any taxes, penalties and/or fees required to be paid under the provisions of tliis section
shall be deemed a debt owed to the City. Any person owing money to the City Un er the
provisions of this section shall be liable in an action brought in the name of the City for the
recovery of such debt. The provisions of this section shall not be deemed a limitation upon the
right of the City to bring any other action including criminal, civil and equitable actions. based
upon the failure to pay the Cannabis Business Tax, penalties and/or fees/imposed by this
section, or the failure to comply with any of the provisions of this section.
3.25.170 Apportionment.
i
if a business subject to the Cannabis Business Tax is'operating both within and outside
the City, it is the intent of the City to apply the Cannabis Business "fax so that the measure of
the tax fairly reflects the proportion of the taxed activity factually 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 order tax return. The "Fax Administrator may
promulgate administrative procedures for apportionment as he or she Finds useful or necessary.
3.25.180 Constitutionality and legality. /
The Camiabis Business Tax is intended to be applied in a manner consistent with
the United States and California Constitutions and State law. None of the tax provided for
by this section shall be applied in a manner that causes an undue burden upon interstate
commerce, a violation of the equa�bprotection 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 or Stat flaw. 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 Tax
Administrator release him or her from the obligation to pay the impermissible portion of
the tax.
3.25.190 Audit and exaZination of premises and records.
A. For tl�4 rpose of ascertaining the amount of Cannabis Business Tax owed or
verifying any representat)ons made by any taxpayer to the City in support of his or her tax
calculation. the 'Fax Administrator shall have the power to inspect any location where commercial
cannabis cultivation occurs 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 cannabis businesses in the City. in
conducting suchnvestigation, the Tax Administrator shall have the power to inspect any
equipment, such as but not limited to computers or point of sale machines, that may contain such
records.
20
RESOLUTION NO. 2022-07
B. It shall be the duty of every person liable for the collection and payment to
the City of any Cannabis Business Tax imposed by this section 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 Tax Administrator or his/her designee shall have the right to inspect of all
reasonable times. '
i
i
C. Should the Tax Administrator be required to perform an audit of the records
of any cannabis business for failure to timely or accurately report cannabis business taxes
pursuant to sections 3.25.060 and/or 3.25.070, the entire cost of the audio all be assessed
against the operator.
3.25.200 Other licenses, permits, taxes, fees or charges. r
r
f
Nothing contained in this section shall be deemed to create, replace, amend, repeal or
be in lieu of, or in any way affect any requirements for, any Commercial Cannabis Permit or
License the City may require for any purpose. In addition, nothing contained in this section
shall be deemed to create, replace, amend, repeal or be in.lieu of, or in any way affect any
requirements for, 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.
3.25.210 Payment of tax does not authorize unlam'vful business.
A. The payment of a Cannabi,�Busincss Tax required by this section, and its
acceptance by the City, shall not entitle,any person to carry on any Cannabis Business.
pro
B. No tax paid under thevisions of this section shall be construed as
authorizing the conduct or continuance of any illegal or unlawful business, or any
business in violation of any lot/or state law.
3.25.220 Deficiency determinations.
If the Tax Administrator is not satisfied that any statement filed as required under
the provisions of this section is correct, or that the amount of Cannabis Business Tax is
correctly computed, he or she may compute and determine the amount to be paid and make a
deficiency determii Lion upon the basis of the facts contained in the statement or upon the
basis of army/iinfoation in his or her possession or that may come into his or her possession
within threers of the date the tax was originally due and payable. One or more
deficiency iations of the amount of tax due for a period or periods may be made.
When a pecontinues engaging in a cannabis is business, a deficiency determination
may be made at any time within three (3) years thereafter as to any liability arising from
engagin in such cannabis is business whether or not a deficiency determination is issued
prior the date the tax would otherwise be due. Whenever a deficiency determination is
ma?, a notice shall be given to the person concerned in the same manner as notices of
assessment are given under Section 3.25.240.
21
RESOLUTION NO. 2022-07
3.25.230 Failure to report— nonpayment, fraud
A. Under any of the following circumstances, the 'fax Administrator may make
and give notice of an assessment of the amount of Cannabis Business Tax owed by a person
under this section at any time: f
1. If the person has not filed a complete statement required/under the
provisions of this section;
2. If the person has not paid the tax due under the pro of this
section; /
3. If the person has not, after demand by thVax Administrator, filed a
corrected statement, or furnished to the Tax Administrator adequate substantiation of
the information contained in a statement already filed cr paid any additional amount of
tax due under the provisions of this section; or
4. If the 'fax Administrator determines that the nonpayment of any
cannabis business tax due under this section is/due to fraud, a penalty of twenty-five
percent (25%) of the amount of the tax shall'�be added thereto in addition to penalties
and interest otherwise payable under thisection and any other penalties allowed by
law. 1
B. The notice of assessment shall separately set forth the amount of any tax known
by the 'Fax Administrator to be due or estimated by the Tax Administrator, after consideration
of all information within the 'fax Administrator's knowledge concerning the business and
activities of the person assessed, to boue under each applicable provision of this section and
shall include the amount of any penalties or interest accrued on each amount to the date of the
notice of assessment.
3.25240 Tax assessment— notice requirements.
The notice of assess4 t shall be served upon the person either by personal delivery,
by overnight delivery by�/nationally-recognized courier service, or by a deposit of the notice
in the United States mai , postage prepaid thereon, addressed to the person at the address of the
location of the busine or to such other address as he or she shall register with the 'fax
Administrator for th purpose of receiving notices provided under this section; or, should the
person have no add ess registered with the Tax Administrator for such purpose, then to such
person's last kno�/n address. For the purpose of Section 325.240 , service by overnight
delivery shall be deemed to have occurred one (1) calendar day following deposit with a
courier and se�vice by mail shall be deemed to have occurred three (3) days following deposit
in the Unite, States mail.
')?
RESOLUTION NO. 2022-07
3.25.250 'Tax assessment hearing, application and determination.
i
Within thirty (30) calendar days after the date of service of the notice of assessment.
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
Cannabis Business Tax assessed by the Tax Administrator shall become final andj'
conclusive. W thin thirty (30) calendar 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
no later than thirty (30) calendar 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 (5) calendar days prior to such hearing. At such hearing said applicant may
appear and offer evidence why the assessment as made by the Ta �Administrator should not
be confirmed and fixed as the tax due. After such hearing the Tax Administrator shall
determine and reassess (if necessary) the proper tax to be charged and shall give written
notice to the person in the manner prescribed in Section 3.15.240 for giving notice of
assessment.
i
3.25.260 Relief from taxes—disaster relief.
A. if a Cannabis Business is unable to comply with any tax requirement
imposed under this section due to a disasterthe business may notify the 'Tax
Administrator of its inability to comply andrequest relief from the tax requirement. For
purposes of this section, "disaster" means'fire,flood,storm,tidal wave, earthquake,or
similar public calamity, whether or not,r�esulting from natural causes.
B. The Cannabis Business shall provide any information required by the
Tax Administrator including,%vithout lunation, why relief is requested, the time period
for which the relief is requested,,and the reason relief s needed for the specific amount
of time. The Cannabis Busin��s agrees to grant the'Fax Adm inistrator or his/her designee
access to the location where/the cannabis business has been impacted due to a disaster.
C. The Tax 1`dminislrator, ui his/her sole discretion, may provide relief from
the cannabis businesstax requirement for businesseswhose operations have been
impacted by a disast � if such tax relief does not exceed fifteen thousand (515,000)
dollars. Such tern rary relief may be granted for a reasonable amount of time,in the
'Tax Administrato s sole discretion, and the amount and duration of'reliefShould be based
upon how long vould reasonably take for the cannabis business to recover from the
disaster. Fun er,the Tax Administrator may require that the cannabis business follow
certain con Iions to receive temporary relief from the cannabis business tax
requueme f.
325.27 Conviction for violation — taxes not waived.
The conviction and punishment of any person for failure to pay the required
C nabis Business Tax shall not excuse or exempt such person from any civil action
23
RESOLUTION NO. 2022-07
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 section or of any State
law requiring the payment of all taxes.Any person violating any of the provisions of this
section shall be guilty of misdemeanor.
325.280 Severability. r
If any provision of this section, or its application to any person or circumstance'is
determined by a court of competent jurisdiction to be unlawful, unenforceable ocothenvise
void, that determination shall have no effect on any other provision of this section or the
application of this section to any other person or circumstance and, to that end, the provisions
hereof are severable.
3.25.290 Remedies cumulative.
All remedies and penalties prescribed by this section orA 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,df this section.
3.25.300 Amendment or modification.
i
Except as set forth in this section 25.300, this section may be amended or
modified but not repealed by the City Coun.icil without a vote of the people. However,
as required by Article XI11 C of the California Constitution, voter approval is required
for any amendment that would expand: extend, or increase the rate of any tax levied
pursuant to this section. The people of the City of l-funtington Beach affirm that the
following actions shall not constitute an increase of the rate of a tax:
A. The restoration or adjustment of the rate of the tax to a rate that is neither
less nor higher than that allov ed by this chapter,in those circumstances where, among
others, the City Council has previously acted to reduce or increase the rate of the tax
within the allowed range 6r is incrementally implementing an increase authorized by this
chapter;
B. An action that interprets or clarifies (i) the methodology of' applying or
calculating the Cannabis Business Tax or (ii) any definition applicable to the tax, so long
as the interpretation or clarification (even if contrary to some prior interpretation or
clarification) is not inconsistent with the provisions of this Chapter 325; or
C./The collection of the tax imposed by this section even ifthe City had, for
some period of tine,failed to collect the tax.
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24
t
RESOLUTION NO. 2022-07
SECTION 2. Pursuant to Article XIII B of the California Constitution, the appropriation
limit for the City of Huntington Beach will be increased by the maximum projected
aggregate collection authorized by the levy of this special tax, as indicated.in Section 1, in
each of the years covered by this Ordinance plus the amount, if any, by which the
appropriation limit is decreased by law as a result of the levy of the special tax set forth in
this Ordinance.
SECTION 3. If any portion of this Ordinance is declared invalid b'a court of law or other
legal body with applicable authority, the invalidity shall not affed or prohibit the force and
effect of any other provision or application of the Ordinance that is not deemed invalid. The
voters of the City hereby declare that they would have circulated for qualification and/or voted
for the adoption of this Section, and each portion thereof, regardless of the fact that any portion
of the initiative may be subsequently deemed invalid. /
SECTION 4. Pursuant to California Constitution Article XIIIC §(2)(b) and California
Elections Code §9217, this Ordinance shall take effect only if approved by two thirds of
the eligible voters of the City of Huntington Beach voting at the Special Election to be
held on June 7, 2022, and shall take effect ten'(10)days after the City Council has certified
the results of the Municipal Election by resolution.
SECTION 5. This order shall take effect accord ng to law ten days after certification of
the election at which it is adopted.
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a
regular meeting thereof held on the/ day of . 20
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Mayor
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ATTEST: APPROVED AS TO FORM:
City Clerk City Attorney
REVIEWED AND APPROVED: INITIATED AND APPROVED:
City Manager
Assistant City Manager
25
ATTACHMENT #2
DRAFT
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF TI-II CITY OF
HUNTINGTON 13EACFI CALLING FOR THE PLACEMENT OF A
GENERAL TAX MEASURE ON "fFIE NOVEMNER 8, 2022,,GENERAL
MUNICIPAL ELECTION BALLOT FORTH]-- SUBMISSION TO THE
QUALIFIED VOTERS OF A PROPOSED ORDINANCE ADDING
CHAPTER 3.25 TO TITLE, 3 OF THE /I-IUNTINGTON
BEACI-IMUNICIPAL CODE, ESTABLISHING A/GENERAL TAX
ON CANNABIS BUSINESSES OPERATING WITFIIN THE CITY OF
HUNTINGTON BEACH; REQUESTING ELECTION SERVICES PROM
CITE COUNTY OF ORANGE "f0 CONDUC,,T SAID ELECTION; AND
SETTING RULES AND DEADLINES FOR ARGUMENT'S AND
REBUTIALS FOR AND AGAINST TI�ORDINANCE.
WHEREAS, pursuant to California Government Code sections 37100.5 and
37101, the City of Huntington Beach has the authority to establish a local business tax
Upon cannabis businesses that engage in lusiness in the City; and
WHEREAS, pursuant to Section 9222 of the California Elections Code, the
City Council has authority to place propositions on the ballot to be considered at a
Municipal Election; and
WHEREAS, the City Council desires to submit to the voters an ordinance establishing
both (i) a not-to-exceed rate ofJ6% local special tax on the gross receipts received by any
cannabis retail business and (ii) a not-to-exceed rate of 1% local special tax on any other
cannabis business, including but not limited to indoor cultivation, manufacturing, testing labs,
and distribution; and WHEREAS] the proposed cannabis business tax is a general tax, the proceeds of
Which would be deposited into the City's general fund for general municipal services to
the public;and/
WHEREAS, on November 6, 1996, the voters of the State of California approved
Proposition 218 (California Constitution, Article X111C), an amendment to the State
Constituti&which requires that all general taxes which are im posed,extended or increased
must be/4ibmitted to the electorate and approved by a majority vote ofthe qualified electors
votiinng in the election;and
/ WHEREAS, the proposed ordinance would establish a general tax which is subject
t6 Proposition 218; and
WHEREAS, pursuant to Proposition 218 (California Constitution Article XIIIC,
§2(b)), the general rule is that any local election for the approval of a general tax
must be consolidated with a regularly scheduled general election for members of the
governing body of the local government;and
289
WHEREAS, the next regularly scheduled general election for members of the
governing body of the local government is set for November 8,2022; and
WHEREAS,pursuant to Proposition 62 and Government Code section/53724, an
ordinance or resolution proposing a general tax must be approved by a two-thirds vote of
all members of the legislative body of (he local government prior to being submitted to
the voters;and
WHEREAS, the City Council also desires to request that the Orange County
Registrar of Voters provide fulleleclion services to the City in order to conduct the General
Municipal Election for the Ordinance/Measure described hercin�to be held on November 3,
2020; and
WHEREAS, the City Council also desires to establish deadlines and rules for
the submission of written arguments and rebuttalsfor and against (lie Ordinance in
accordance with applicable California Elections Code procedures;and
WHEREAS, the specific terms relatingwthe cannabis business tax are provided
for inthe ordinanceto beconsidered by the qualified voters,attached hereto as Exhibit I
(the "Ordinance" or "Measure") and by this reference made an operative part hereof,
and in accordancewithallapplicablel�s.
NOW, THEREFORE, 1-111 CITY COUNCIL OF -fI-IE CITY OF
I-IUNTTNGTON BEACH, CALIFORNIA, DOES RE-SOLVE, DECLARE,
DETERMINE, AND ORDER A IFOLL.OWS:
SECTION 1.Recitals. The Ci }(Council hereby finds and determines that the foregoing
recitals are true and correct, are incorporated herein and by this reference made an
operative part hereof. /
SECTION 2. Submission of Ballot Measure. The City COunell of the City, pursuant to
its right and authority as contained in California Propositions 218 and 62, Government
Code 53724, and Elections Code section 9222, hereby orders the Ordinance attached
hereto as Exhibit/l to be submitted to the qualified voters of the City at the General
Municipal Election to be held on November 8, 2022. The proposed Ordinance shall be in
the fornn atta • ed hereto as Exhibit I to this Resolution and is incorporated by this
reference as i fully set forth herein.
SECT[O �3: Ballot Mcasure.The City Council, pursuant to its right and authority,does
hereby Eder that the Measure shall be presented and printed upon the ballot submitted to
the qt lified voters in the manner and fornn set forth in this Section 3. On the ballot to be
submtted to the qualified voters at the General Municipal Election to be held on
November 8, 2022, in addition to any other matters required by law, there shall be printed
nbstantially the following:
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Measure_: The City of Huntington Beach Retail Cannabis Tax Measure
Shall the City adopt a special tax measure of up to 6% of gross receipts on
cannabis retailers and up to 1% of gross receipts on all other cannabis YES
businesses, which is expected to generate an estimated $300,000 to $600,000 .'
annually for the specific purposes of funding police and homeless and -
behavioral health services, and levied until terminated by voters? ?
NO
SECTION 4. Election procedures.
A. The ballots to be used at the election shall be in the form and content as required by law.
B. In accordance with Section 10403 orfthe Elections Code,the Board of Supervisors of
Orange County is hereby requested to consent to the consolidation of a General
Municipal Election with the Statewide General Election on November 8, 2022,forthe
purpose ofsubmittingto the.votersofthe City of Huntington 13each,a question relating
to the adoption of the proposed or finance.
C. In addition, in accordance with Section 10002 of the Elections Code, the Board of
Supervisors is hereby requested to consent to having the County Election
Department/Registrar of Voters render full election services to the City of Huntington
Beach as may be requested by the City Clerk of said City, the County of Orange to
be reinnburscdiin full for such services as are performed.
D. The full eldion services which the City of Huntington Beach requests the Registrar
of Voters, or such other official as may be appropriate, to perform and which such
officer/is hereby authorized and directed to perform, if said Board of Supervisors
consents, include: the preparation, printing and mailing of sample ballots; the
establishment or appointment of vote centers, and election officers,the preparation,
printing,mailing and furnishing of vote-by-nail ballots,making such publications as are
required by law in connection therewith;the furnishing of ballots, voting booths and
other necessary supplies or materials for polling places;the canvassing of the returns
/ of the election and the furnishing of the results of such canvassing to the City Clerk of the
City of Huntington Beach;and the performance of such other election services as may
be requested by the City Clerk.
E. The City Clerk is authorized, instructed and d rected to procure and furnish,or cause
to be procured and furnished through the County of Orange,any and all official
291
ballots, notices, printed matter and all supplies, equipment and paraphernalia that
may be necessary in order to properly and lawfully conduct the election.
F. In all particulars not recited in this Resolution, the election shall be held and
conducted as provided by law for holding municipal elections in the City.
G. Notice of the time and place of holding the election is given and the City-'Clerk
is authorized, instructed and directed to give further or additional notice of the
election, in time, form, and manner as required by law.
H. All ballots shall be tallied in a manner that complies with all applicable laws and
as designated by the Registrar of Voters.
I. The Orange County Registrar of Voters is hereby authorized to canvass the returns
of said election. /
J. The City Clerk of the City of Huntington Beach shall receive the canvass from
the County as it perta his to the election on the measure, and shaIIcertdy the results
to the City Council, as required by raw. /
SECTION 5.Argunaents and Impartial Analysis/
A. The City Council authorizes (i)the City Council or any meniber(s) of the City
Council,
(ii) any individual voter eligible to vote on the above measure, (iii) a bona
fide association of such citizens or(iv) any combination of voters and associations,
to file a written argument in favor/of or against the City measure, in accordance
with Article 4,Chapter 3,Division 9 of the Elections Code of the State of California
and may change the argument until and including by 5:30 p.m.,
after which no arguments for or against the measure may be submitted to the City
Clerk. Arguments in favor of or against the measure shall each not exceed 300
words in length. Each aguntent shall be filed with the City Clerk, signed, and
include the printed nanie(s) and signature(s) of the author(s) submitting it, or if
submitted on behalf of an organization, the name of the organization, and the
printed name and signature of at least one of its principal officers who is the author
of the argumclit./
B. The City Clerk shall comply with all provisions of law establishing priority of
arguments for printing and distribution to the voters, and shall take all necessary
actions,to cause the selected arguments to be printed and distributed to the voters.
C. Pursuant to Section 9280 of the Elections Code, the City Council directs the City
]erk to transmit a copy of the measure to the City Attorney. The City Attorney shall
prepare an Impartial Analysis of the measure, not to exceed 500 words in length,
showing the effect of the measure on the existing law and the operation of the
measure. The City Attorney shall transmit such Impartial Analysis to the City Clerk,
who shall cause the analysis to be published in the voter information guide along
with the ballot measure as provided by law. The Impartial Analysis shall be filed
by the deadline set for filing of primary arguments as set forth in subsection (A)
292
above. The Impartial Analysis shall include a statement indicating whether the
measure was placed on the ballot by a petition signed by the requisite number of
voters or by the City Council.
D. That the provisions of this Section 5 herein shall apply only to the election to be held
on November 8, 2022,and shall then be repealed.
SECTION 6. Rebuttals
A. Pursuant to Section 9285 ofthe Elections Code ofthe State of Cali fornia,when the
City Clerk has selected the arguments for and against the various City initiated
measures which will beprintedand distributed tothevoter, the City Clerk shall send
copies of the argument in favor of the measures to the authors of the argument
against,and copies of tile argument against to the authors of the argument in favor.
The authors or persons designated by them may prepare and submit rebuttal
agumentsnotexceeding250words. The rebuttalargunnents shall be filed withthe
City Clerk not later than by 5:30 pin. Rebuttal arguments shall
be printed in the same manner as the direct at- unients. Each rebuttal argunent
shall immediately follow thedirectargument which itseeks to rebut.
B. The provisions of this Section 6 Inereirs�hall apply only to the election to be held
on November 8, 2022,and shall then/be repealed.
SECTION 7. Placement on the Ballot. Tile full text of the Ordinance/Measure shall not be
printed in the voter information guide„and a statement shall be printed inthe ballot pursuant
to Section 9223 of the Elections Code advising voters that they may obtain a copy of this
Ordinance/Measure at no cost,upon request made to the City Clerk.
SECTION 8. Delivery of Res/111tion to County. The City Clerk shall certify to the passage
and adoption of this Resolution and enter it into the book of original resolutions. The City
Council directs the City/Clerk to deliver copies of this Resolution, including the
Ordinance/Measure attached hereto as Exhibit I,to the Clerk of the Board of Supervisors
of Orange County and"to the Registrar of Voters of Orange County.
SECTION 9.Publi exarnination. Pursuant to California Elections Code section 9295,this
Measure will beiii1vailable for public examination for no fewer than ten (10) calendar days
prior to being submitted for printing in the voter information guide. The City Clerk shall
post notice the City Clerk's office of the specific dates that the examination period will
run.
SECTION I O.CEQA.The City Council hereby finds and determines that the ballot nneasure
relates to organizational or administrative activities of governments that will not result
in direct or indirect physical changes in the environment, and therefore is not a project
within the meaning of the California Environmental Quality Act ("CEQA") and the State
CEQA Guidelines, section 15378(b)(5).I'll is ballot measure is also exempt fi-onn CEQA
review pursuant to Business & Professions Code 26055(h) because any subsequent
ordinance adopted by the City Council permitting cannabis businesses will require
environmental review prior to any decision relating to the issuance of a permit or other
authorization for the cannabis business to commence operations.
293
SECTION 11.Severability. If any provision of this Resolution or the application thereof
to any person or circumstance is held invalid, such invalidity shall not affect other
provisions or applications of the Resolution which can be given effect without the invalid
provision or application, and to this end the provisions of this Resolution are severable.
The City Council hereby declares that it would have adopted this Resolution
irrespective of the invalidity of any particular portion thereof.
S13CTION 12. Council will designate a subcommittee to draft an argument on COLUH]l'S
behalf, or designate specific Council Members to draft an argument under their names. In
the event such a Council authorized argument is not prepared, individual voters (including
Council Members) can submit an argument, and a priority is set forth by Election Code
Section 9287 to be applied by the City Clerk in selecting the ballot argument to use.
SECTION 13. Effective Date of Resolution. This Resolution shall take effect unmediately
upon its adoption.
294
EXHIBff 1
COUNCIL-SPONSORED INITIATIVE MEASURE TO BE SUBMITTED DIRECTLY TO/
THF.,VOTERS
'file City Council for the City of Huntington Beach submits the following
measure to the voters of the City for approval and enactment:
DRAFT
ORDINANCE- NO.20-XX /
AN ORDINANCE OF THE PEOPLE OF THE CITY OF HUNTINGTON
BEACH, CALIFORNIA, ADDING CHAPTER 3/ TO TITLE 3 OF
THE HUNTINGTON BEACHMUNICIPAL CODE ESTABLISHING A
TAX ON CANNABIS/MARAJUANA BUSINESSES OPERATING
WITHIN THE CITY OF HUNTINGTON 7A�CI-1
The People of the City of Huntington Beach ordain as follows:
SECTION I. Subject to the approval of of the voters of the City of
Huntington Beach at the General Municipd Electionso designated by the City Council
in a separate resolution placingthe prVosal on the ballot for such election,Chapter 325
is hereby added to Title 3 ofthe Hunti�ri gton Beach Municipal Code to read as follows:
"Chapter 3.25. CANNABIS BUSINESS TAX
3.25.010'1'itle
3.25.020 Authority and purpose
3.25.030 Intent
3.25,040 Definition
3.25,050 Tax imljosed
3.25.060 Reporting, and remittance of tax
3.25.070 Payn-Arts and communications - timely remittance
3.25.080 Payment - when taxes deemed delinquent
3.25.090 No{ice not required by City
3.25.100 V6nalties and interest
3.25.110,Refunds and credits
3.25.126 Refunds and procedures
3.25.00 Personal cultivation not taxed
3.25!140 Administration of the tax
3.25.150Appeal procedure
325.160 Enforcement - action to collect
3.25.170 Apportionment
3.25.180 Constitutional ity and legality
3.25.190 Audit and examination of premises and records
325200 Other licenses, permits,taxes,fees or charges
325210 Payment of tax does not authorize unlawful business
325220 Deficiency determinations
325230 Failure to report - nonpayment, fraud
325240"fax assessment -notice requirements
325250 Tax assessment - hearing,application, and determination
3 25260 Relief from taxes-disaster relief
295
325270 Conviction for violation - taxes not waived
3.25290 SeverabiIity
325.300 Remedies cumulative
3.25.310 Amendment or modification
325.010 Title. /
This ordinance shall be known as the Cannabis Business Tax Ordinance.
325.020 Authority and Purpose.
The purpose of this Ordinance is to adopt a tax, for revenue purposes, pursuant to
Sections 37101 and 37100.5 of the California Government/Code, upon cannabis
businesses that engage in business in the City of I-luntington Beach("City"), the Cannabis
Business Tax is levied based upon business gross recepts, except for commercial
cannabis which shall be taxed on square footage. It is not sales and use tax, a tax upon
income,or a tax upon real property.
The Cannabis Business "fax is a general 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 sectiorto
laced in the City's General Fund and be
available for any lawful municipal pu
325.030 Intent.
The intent of this Ordinaney a tax on all cannabis businesses that
operate in the City, regardless of whether such business would have been legal at the time
this section was adopted. Nothing"in this section shall be interpreted to authorize or permit
any business activity that would not otherwise be legal or permissible under laws
applicable to the activity at the/time the activity is undertaken.
3.25.40 Definitions.
The followingnvords and phrases shall have the meanings set forth below when
used in this section
"Business" hall include 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 shahot 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,
manufactw•e, 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" shall not include "industrial hemp," unless otherwise specified.
"Cannabis Product" means raw cannabis that has undergone a process whereby
the raw agricultural product has been transformed intoa concentrate,an edible
296
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.
.
Cannabis Business means any business activity involving cannabis or /dusti
hemp, including but not limited to cultivating, transporting, distributing,
manufacturing, compounding, converting, processing, preparing, storing,packaging,
delivering, testing, dispensing, retailing and wholesaling of cannabis, cannabis
products, industrial hemp, industrial hemp products or of ancillary products and
accessories,whetherornotearried oil forgainorprofit.
"City" means the City of Huntington Beach.
"Cannabis Business Tax" or "Business Tax," means the taxes due pursuant to
this chapter for engaging in a Cannabis Business in the'/City.
"Commercial Cannabis Cultivation" means ci�ivation of Cannabis undertaken
in the course of conducting a Cannabis Business.
"Commercial Cannabis Permit" nteans4 ermit issued by the City to a person to
authorize that person to operate a Cannabis Business or engage in business as a
Cannabis Business within the City.
"Cultivation" means any activity involving the planting, growing, harvesting,
drying,curing, grading, or trimming of cannabis and includes, but is not limited to,
the operation of an indoor, outdoor, mixed light, or nursery. All outdoor or mixed light
cultivation shall be prohibited in the City.
"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, conunission, barter or any other form of
compensation. /
"Engaged in business as a cannabis business" means the commencing,
conducting,operating, managing or carrying on of a 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 fi•onn an outside
location/to engage in such activities. A person shall be deemed engaged in business
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 inthe City for sale inthe ordinary course of business;
297
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 n the City.
The foregoing specified activities shall not be a limitation on the meaning of
"engaged in business."
"Distribution means business activities that engages in the procurement, sale, and
transport of cannabis and cannabis products between other licensed/cannabis businesses.
"Evidence of doing business" means evidence Such��a 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 ,gency or to the public that such
person is engaged in a cannabis business in the City. 7
"Gross Receipts," except as otherwise specifically provided, means, whether
designated a sales price, royalty, rent, slot tinly/ fee, 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 nat re for which a charge is made or credit allowed
(whether such service, act or employnict } 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 matcrials/A/Ised, labor or service costs, interest paid or payable,
losses or any other expense whatsoever. However,the followingshall be excluded from Gross
Receipts:
1. Cash discounts where allowed and taken on sales;
2. Any tax requiredby law to be included in or added to the purchase price and
collected f 7the consumer or purchaser;
3. Such part the sale price of any property returned by purchasers to the seller
as refw'de(I by the seller by way of cash or credit allowances or return of
refundable deposits previously included in gross receipts;
4. Rccceipts derived from the occasional sale of used, obsolete or surplus itdc
fi�tures, 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 located in the City or if authorized by the Tax Administrator in
writing in accordance with section 325.140 (B);
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 who lcor 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
298
and taken into income of the business shall not be excluded when in excess of one
dollar;
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 Tax Admi nislratoi 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.
9. Retail sales of 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 /nof (annabis
0shall not be subject to the cannabis
business tax under this section.
"Indoor Cultivation" means the cultivate inside a permanent enclosed
building or structure.
"Lighting" means a source of ligh hat is primarily used for promoting the biological
process of plant growth. Lighting does rot include sources of light that primarily exist for
the safety or convenience of staff o visitors to the facility, such as emergency lighting,
walkway lighting,or light admitted v' small skylights,windows or ventilation openings.
"Manufacturing" means tl production, preparation, propagation, or compounding of
Cannabis or Camiabis product either directly or indirectly or by extraction methods, or
independently by means of ch iical synthesis, or by a combination of extraction and chemical
synthesis at a fixed location tl fit packages or repackages Cannabis or Cannabis products or labels
or relabels their containers.
"Person" mea s an individual, firm, partnership, joint venture, association,
corporation, limited I' ility company, estate,trust, business trust,receiver, syndicate, or any
other group or con ination acting as a unit, whether organized as a nonprofit or for-profit
entity, and includ the plural as well as the singular number.
"Proces ng" means a cultivation site that conducts only trimming, drying, curing,
grading, pac ging, or labeling of cannabis, industrial hemp and non-manufactured cannabis
products.
" etail, Retailer, or Retail Facility" means a licensed premises where cannabis,cannabis
products or devices for the use of cannabis or cannabis products are offered, either individually
or in ar combination for retail sale, including an establishment that delivers cannabis or cannabis
prods is as part of a retail sale.
"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, 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, but
does not include the return of cannabis, cannabis products, industrial hemp and/or industrial
hemp products to the licensee from whom the cannabis, cannabis product, industrial hemp
299
and/or industrial hemp product was purchased.
"State" means the State of California.
"State license," "license," or "registration" means a State license issued pursuant to
California Business & Professions Code Section 26050, and all other applicable State laws,
required for operating a cannabis business.
"Tax Administrator" means the City Manager of the City of 1 ntington Beach or his
or her designee.
'Testing Laboratory" means a cannabis business that (i offers or performs tests of
cannabis, cannabis products,industrial hemp and/or industrial'hemp products, (ii) offers no
service other than such tests, (iii) sells no products, excepting only testing supplies and
materials, (iv) is accredited by an accrediting body that is independent from all other
persons involved in the cannabis industry in the State, and(v) is licensed by the State Bureau
of Cannabis Control or other Slate agency required by aw.
3.25.50 Tax hnposed.
A There is imposed upon each person who is engaged in business as a Cannabis
Business a Cannabis Business Tax. Such tax i payable regardless of whether the business has
been issued a Commercial Cannabis Permit to operate lawfully in the City or is operating
unlawfully. The City's acceptance of a 'annabis Business Tax payment from a Cannabis
Business operating illegally shall not c nstitute the City's approval or consent to such illegal
operations.
B The City Council n y,by resolution or ordinance, set, increase or decrease the
rate of the Cannabis Business T/ including the initial rate of Cannabis Business Tax, within
the minimum and maximum yyrescribed range of tax rates. Notwithstanding the foregoing,
in no event shall the City Cotfncil repeal this tax,or set any adjusted rate that is less than the
mininuun rate, nor that exce ds the maximum rates calculated pursuant to this section.
C The/min* ium and maxunum rate of the Cannabis Business Tax shall be
calculated as folloerson engaged in retail sales of cannabis and/or cannabis products,
incs a retailer (dispensary) or non-storefront retailer (retail delivery
b siness),or microbusiness, shall be subject to u uu
p to a maximn tax rate [lot
o exceed six percent (6%) of gross receipts.
2. Every person engaged in the indoor cultivation for cannabis shall be
subject up to a maxinuun tax rate not to exceed one percent(1%)of gross
receipts.
3. Every person engaged in the operation of a testing laboratory for
cannabis and/or cannabis productsshall be subject to up to a maximum
tax rate not to exceed one percent (1%)of gross receipts.
4. Every person engaged in distribution of cannabis and/or cannabis
products shall be subject to up to a maximum tax rate not to exceed one
percent (1%)of gross receipts.
300
5. Every person engaged in manufacturing or processing of cannabis and/or
cannabis products, or any other type of cannabis business not described
in Section 3.25.050 (C) (1), (2), (3), or (4) shall be subject,to up to a
maximum tax rate not to exceed one percent (l%)of gross.receipts.
Persons subject to (lie Cannabis Business "Fax shall register with th�City and pay
any fees established by the City Council. Such fees shall not exceed the,cost of providing
the service and not be considered as a tax and may be adjusted from time to time to recover
related costs by resolution of the City Council.
3.25.60 Reporting and remittance of tax.
A The Cannabis Business 'Fax imposed by th jsection shall be paid,in arrears,
on it monthly basis. Each person owing a Cannabis Business Tax each calendar month
shall, no later than the last day of the month following the close of the calendar month,
file with the Tax Administrator a statement ("Fax Statement") of the tax owed for that
calendar month and the basis for calculating that tax. The Tax Statement is required to be
submitted on a form prescribed by the Tax Mill inistrator. The Cannabis Business Tax
for each calendar month shall be due and payable on that same date that the Tax Statement
for the calendar month is due.
B Upon cessation of a Cannabis Business,Tax Statements and cannabis tax
payments shall be immediately due for all calendar months up to and includingthe calendar
month during which cessation occurred.
C The Tax Administrator may, at his or her discretion, establish alternative
reporting and payment periods f9/any taxpayer as the Tax Adnn inistrator deems necessary
to ensure efficient and effective collection ofthe cannab is business tax,but no less frequently
than quarterly. The Tax Administrator may also require that a deposit, to be applied against
the Cannabis Business Taxes due for a calendar month, be made by a taxpayer at the
beginning of that calendar month. In no event shall the deposit required by the "fax
Administrator exceed the Cannabis Business Tax amount he or she projects will be owed,in
his or her judgment, bAhe taxpayer for the calendar month. The Tax Administrator may
require that a taxpayer make Cannabis "fax payments via it cashier's check,money order,
wire transfer,or similar instrument.
325.070 Payments and communications -timely remittance.
Whenever any Cannabis Tax payment, statement, report, request or other
comnnunication is due, it must be received by the Tax Administrator on or before the final
due date postmark postmark will not be accepted as timely remittance. If the due date would fall
on a Saturday,Sunday, or a holiday observed by the City,the due date shall be the last
business day of the month following the close of the calendar month which
the City is open to the public.
125.080 Payment when taxes deemed delinquent.
Unless otherwise specifically provided under other provisions of this section, the
/Ci
annabis Business Taxes required to be paid pursuant to this section shall be deemed
elinquent if not received by the 'fax Administrator on or before the due date as specified
n Sections 325.060 and/or 3.25.070.
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325.090 Notice not required by the City. `
The City may as a courtesy send a tax notice to the Cannabis Business winch owes
the City a Cannabis Business Tax. However, the Tax Administrator is not required to send
a delinquency or other notice or bill to any person subject to the provisior�/Kof this section.
Failure to send such notice or bill shall not affect the validity of any lax or penalty due under
the provisions of this section.
3.25.100 Penalties and interest.
A Any person who fails or refuses to pay any Cannabis Business Tax requiredto
be pail pursuant to this section on or before the due date shall pay penalties and interest as
follows:
1. A penalty equal to ten percent 101%) of the amount of the tax due,
in addition to the amount ofthe tax due, plus interest on the unpaid
tax calculated from the due date of the tax at the rate of one percent
(1.0%) per month. /
2. If the tax remains unpaid for a period exceeding one calendar month
beyond the due date,ani additional penalty equal to twenty-five percent
(25%) of the amou l of the tax,plus interest at the rate of one percent
(l.0%) per month on the unpaid tax and on the unpaid penalties.
3. interest shall/be applied at the rate of one percent (1.0%) per month
on the first�6ay 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 or electronic payment is submitted in payment of a
Cannabis Business Tax and the payment is subsequently returned unpaid by the bank for
any reason, the taxpayer will be liable for the tax amount due plus any fees, penalties and
interest as provided f in this section, and any other amount allowed under State law.
C 'I'll City may revoke or refuse to renew the license required by Section
325.030 for an usincss that is delinquent in the payment of any tax due pursuant to this
section or tha ails to make additional fee payments required by the City.
3.25.110 Refundsandcredits.
No refund shall be made of any tax collected pursuant to this section,except
as pr ided in Section 3.25.120.
B No refund of any Cannabis Business Tax collected pursuant to this section
shall be made because of the discontinuation,dissofution, or other terminationofabusiness.
3.25.120 Refunds and procedures.
A Whenever the amount of any Cannabis Business Tax,penalty or interest has
been overpaid, paid more than once,or has been erroneously collected or received by the
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City under this section, it may be refunded to the claimant who paid the tax provided that
it written claim for refund is filed with the Tax Adm inistrator within one (I)year of the dale
the tax was originally due or paid, whichever came first.
B Tlie Tax Administrator,his or her designee, or any other City officer charged
with the administration ofthis section shall have the right to examineand auditall the books
and business records of the claimant inorder to determine the eligibility of the claimant to the
claimed refund. No claim for refund shall be allowed if the clainant/refuses to allow
such examination of claimant's books and business records after equest by the Tax
Administrator to do so.
C In the event that the Cannabis Business Tax `y is erroneously paid in an
amount in excess of the tax due,and the error is attributable to the City, the City shall refund
the amount of tax erroneously paid; provided that (i) a clainl,for refund has been timely filed
with the Tax Administrator; and (ii) the refund cannot exceed, under any circumstance,the
amount of tax overpaid duringthe twelve nnonths precedingthc last month for which the claim
states the tax was overpaid.
3.25,130 Personal cultivation not taxed.
The provisions of this section shall not apply to personal cannabis cultivation
or personal use of cannabis, to the extent those activities are authorized in the State's
"Medicinaland Adult Use Cannabis Regulation and Safety Act,"as may be amended. This
section shall not apply to personal use 0f6nnabis that is specifically exempted from State
licensing requirements,that nneets the definition of personal use or equivalent terminology
tinder State law, and provided that the individual receives no compensation whatsoever
related to that personal cultivatior'pr C.
3,25.140 Administration of the tax.
A ItslnallbetheduyoftheTaxAdministratorto collect the taxes,penalties, fees,
and perform the duties required by this section.
B For purposes of administration and enforcement of this section generally,the
Tax Administrator may from lime to time promulgate such administrative interpretations,
rules and/or procedures consistent with the purpose,intent and express terms of this section
as he or she deenis necessary to implement or clarify such provisions or aid in enforcement.
C The "fax Administrator may take such administrative actions as needed to
administer thyCannabis Business Tax, including but not limited to:
1. Provide to all Cannabis Business taxpayers forms for the reporting
of the tax;
2. Provide information to any taxpayer concerning the provisions of
this section;
3. Receive and record all taxes remitted to the City as provided in this
section;
4. Maintain records of taxpayer reports and taxes collected pursuant to
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this section;
5. Assess penalties and interest to taxpayers pursuant to this section;
6. De(e7nineamOUnls owed underand enforce collection pursuant to this
section.
325.150 Appeal procedure.
Any taxpayer aggrieved by any decision of the Tax Administrator with respect to the
amount of tax, interest,penalties and fees, if any,due under this section may appeal to the City
Council by filing a notice of appeal with the City Clerk within thirty (30) calendar days of the
serving or mailing of the Tax Administrator's determination of the amount due. The City
Clerk, or his or her designee,shall fix a time and place for heariu6 such appeal,and the City
Clerk,or his or her designee,shall give notice in writing to such operator at the last known place
of address. The finding of the City Council shall be final anconclusive and shall be served
upon the appellant in the manner prescribed by this section 325.150 for service of notice of
hearing. Any amount found to be due shall be immediately due and payable upon the service
of the notice.
3.25.160 Enforcement - action to collect.
Any (axes, penalties and/or fees requi red to be paid under the provisions of this
section sliall be deemed a debt owed to theCity. Any person owing money to the City
under the provisions of this section shall be)iable in an action brought in the name of the City
for the recovery of such debt. The provisions of this section shall not be deemed a lunitation
upon the right of the City to bring any the• action including criminal, civil and equitable
actions, based upon the failure to pay the Cannabis Business Tax, penalties and/or fees
imposed by this section,or the failure/to comply with any of the provisions of this section.
3.25.170 Apportionment.
If a business subject o the Cannabis Business Tax is operating both within and
outside the City, it is the intent of the City to apply the Cannabis Business "fax so that the
measure of the tax fairly rAects the proportion ofthe 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 taxpaY& may indicate said apportionment on his or her tax return. The Tax
Administrator may p561nulgate administrative procedures for apportionment as he or she finds
useful or necessary,/
325.180 constitutionality and legality.
The annabis Business "fax is intended to be applied in a manner consistent with
the UnitedxStates and California Constitutions and State law. None of the tax provided for
by this section 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 or State law. If a person believes that the tax, as applied to
hum or her, is unpermissible under applicable law, he or she may request that the Tax
Administrator release him or her from the obligation to pay the impermissible portion of
the lax.
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3.30.190 Audit and examination of premises and records.
A For the purpose of ascertaining the amount of Cannabis Business Tax owed
or verification any representations made by any taxpayer to the City in support of his or her
tax calculation, the Tax Administrator shall have the power to inspect any location where
commercial cannabis cultivation occurs and to audit and examine./II 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 cannabis
businesses in the City. in conducting such investigation, the%fax Administrator shall have
the power to inspect any equipment, such as but not limited to computers or point of sale
machines, that may contain such records.
B it shall be the duty of every person liabl/For he collection and payment to the
City of any Cannabis Business Tax imposed by this eetion to keep and preserve, for a period
of at least three (3) years, all records as may be ccessary 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 or his/her designee shall have the right to inspect at all
reasonable times.
C Should the Tax Administrator be required to perform an audit of the records
of any cannabis business for failure to timely or accurately report cannabis business taxes
Pursuant to sections 330.060 and/or�3.30.070, the entire cost of the audit shall be assessed
against the operator.
3.25.200 Other licenses,,permits,taxes, fees or charges.
A Nothing contained in this section shall be deemed to c r e a t e, rep I ace,
amend, repeal or ben lieu of, or in any way affect any requirements for, any
Commercial Cannabis/Permit or License the City may require for any purpose. In
addition, nothingcontained inthis section shall bedeemed to create, replace, amend,
repeal or be in lieu of, or in any way affect any requirements for, any tax, fee or other
charge imposed, assessed or required under any other Chapter of this code or any other
ordinance or r7lution of the City.
3.25.210 ayment of tax does not authorize unlawful business.
A/ebythe
he payment of a Cannabis Business Tax required by this section, and its
acceptan City, shall not entitle any person to carry on any Cannabis Business unless
the peon has complied with all of the requirements of this code and all other applicable
State aws.
7
B No tax paid under the provisions of this section shall be construed as
authorizing the conduct or continuance of any illegal or unlawful business, or any business
in violation of any local or state law.
3.25.220 Deficiency determinations.
if the Tax Administrator is not satisfied that any statement filed as required under
the provisions of this section is correct, or that the amount of Cannabis Business Tax is
correctly computed, he or she may compute and determine the amount to be paid and
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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 (3)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 oryperiods may be
made. When a person discontinues engaging in a cannabisis business, a deficiency
determination may be made at any time within three (3) years thereafter as to any liability
arising from engaging in such cannabisis businesswhether or not a deficiency determination
is issued prior to the date the tax would otherwise be due. Whenever a deficiency
delcrm ination is made, a notice shall be given to the person concerned in the same manner
as notices of assessment are given under Section 3.252X—
A
325.230 Failuretoreport—nonpayment, fraud
Under any of the following circumstances, the ax Administrator may make
and give notice of an assessment of the amount of Cannabis Business Tax owed by a person
under this section at any time:
1. If the person has not filed a complete statement required under
the provisions of this section;
2. If the person has n paid the tax due under the provisions of
this section;
3. If the person has not, after demand by the Tax Administrator, filed a
corrected statement,or fur�shed to the Tax Administrator adequate substantiation of
the information containO in a statement already filed, or paid any additional
annount of tax due under/the provisions of this section;or
4. If t/'VXTdIC
x Administrator determines that the nonpayment of any
cannabis business under this section is due to fraud,a penalty of twenty- five
percent (25%) o�ic amount of the tax shall be added thereto in addition to penalties
and interest otherwise payable under this section and any other penalties allowed by
law.
B The notice of assessment shall separately set forth the annount of any tax
known by the " x Administrator to be due or estimated by the "fax Administrator, after
consideration all information within the Tax Administrator's knowledge concerning the
business and�tivities of the person assessed, to be due under each applicable provision of this
section and,"�Ball include the amount of any penalties or interest accrued on each amount to the
dale of thelnotice of assessment.
3.25.240 fax assessment - notice requirements.
The/ticc of assessment shall be served upon the person either by personal delivery, by
overnight delivery bya nationally-recognized courier service,or by a deposit of the notice in the
lVinited 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 tine Tax
Administrator for the purpose of receiving notices provided under this section; 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 p u r p o s e o f Section 3.25 240, a service by overnight
delivery shall be deemed to have occurred one (1) calendar day following deposit with a
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courier and service by mail shall be deemed to have occurred three (3)days following deposit/
in the United States mail. /
325.250 Tax assessment hearing, application and determination.
Within thirty (30) calendar days after the date of service of the notice of assessment
the person may apply in writing to the Tax Administrator for a hearing on the asLsment. If
application for a hearing before the City is not made within the time herein/prescribed,the
Cannabis Business Tax assessed by the Tax Administrator shall become final and conclusive.
W thin thirty (30) calendar 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 er no later than thirty
(30)calendar 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 (5)
calendar 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 lhe Tax Admini Bator shall determine and reassess
(if necessary)the proper tax to be charged and shall give written notice to the person in the
manner prescribed in Section 3.25.240 for giving notice of assessment.
3.25.260 Relief fi-onn taxes - disaster relief.
A If Cannabis Business is unable to comply with any tax requirement imposed
Under this section due to a disaster, the business may notify the Tax Administrator of its
inability to comply and request relieffi•om the tax requirement. For purposes of this section,
"disaster' means fire, flood, storm, tidal wave, earthquake, or similar public calamity,
whether or not resulting from natural causes.
B The Cannabis BusinZs shall provide any information required by the Tax
Administrator including, without limitation, why relief is requested, the time period for
which the relief is requested,and the reason relief is needed for the specific amount of
time. The Cannabis Businesy4grees to grant the Tax Administrator or his/her designee
access to the location when he cannabis business has been impacted due to a disaster.
C The Tax �dnunistrator, in his/her sole discretion, may provide relief from
the cannabis business t, x requirement for businesses whose operations have been impacted
by a disaster if such tax relief does not exceed fifteen thousand ($15,000) dollars.
Such temporary relief may be granted for a reasonable amount of time, in the Tax
Administrator's s91e discretion, and the amount and duration of i-eliefsliotild be based upon
how long it woUu d reasonably take for the cannabis business to recover from the disaster.
Further, the T x Administrator may require that the cannabis business follow certain
conditions t /receive temporary relieffi-om the cannabis business tax requirement.
325.270 Conviction for violation -taxesnotwaived.
The conviction and pUnishment of any person for failure to pay the required
Cai abis Business Tax shall not excuse or exempt such person fi•onn any civil action for
th tax debt unpaid at the time of such conviction. No civil action shall prevent a criminal
p-osecution for any violation of the provisions of this section or of any State law requiring
the payment of all taxes.Any person violating any of the provisions of this section shall
be guilty of misdemeanor.
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325.290 Severability. /
If any provision of this section,or its application to any person or circumstance,
is 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
section or the application of this section to any other person or circumstance and, to
that end, the provisions hereof are severable.
325.300 Remedies cumulative.
All remedies and penalties prescribed by this section 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 ofthis section.
3.25.310 Amendment or modification.
Except as set forth in this section 3.25.310, this section may be amended or
modified but not repealed by the City Council without it vote of the people. However, as
required by Article X11I C of the California Constitution, voter approval is required for
any amendment that would expand, extend, ol�wcrease the rate of any tax levied pursuant
to this section. The people of the City of Huntington Beach affirm that the following
actions shall not constitute an increase offtthe rate of a tax:
A The restoration or adjustnt�l,t of the rate of the tax to a rate that is neither less
nor higher than that allowed by this chapter,in those circumstances where, among others,
the City Council has previously acYd to reduce or increase the rate of the tax within the
allowed range or is incrementally pnplementing an increase authorized by this chapter;
B An action that
/,tnterprets or clarifies (i) the methodology of applying or
calculating the Cannabis Bu ness Tax or (ii) any definition applicable to the tax, so long as
the interpretation or clarifica'iion (even if contrary to some prior interpretation or clarification)
is not inconsistent withh tV provisions of this Chapter 325; or
C The collection ofthe tax imposed by this section even ifthe City had,for sonne
period of time, failed to collect the tax.
SECTION 2. pLUSuant to Article XIII B of the California Constitution, the appropriation
limit for the City of Huntington Beach will be increased by the maximum projected aggregate
collection authorized by the levy of this general tax, as indicated in Section I, in each of
the year covered by this Ordinance plus the annount, if any, by which the appropriation
limit is ecrcased by law as a result of the levy of the general tax set forth in this Ordinance.
S TION 3. If any portion of this Ordinance is declared invalid by a court of law or other
legal body with applicable authority, the invalidity shall not affect or prohibit the force
and effect of any other provision or application of the Ordinance that is not deemed invalid.
The voters of the City hereby declare that they would have circulated for qualification and/or
voted for the adoption of this Section, and cacti portion thereof, regardless of the fact
308
that any portion of the initiative may be subsequently deemed invalid. /
SECTION 4. Pursuant to California Constitution Article XIIIC §(2)(b) and California
Elections Code §9217, this Ordinance shall take effect only if approved by/a majority of
the eligible voters of the City of Huntington Beach voting at the General Municipal Election
to be held on November 3, 2020, and shall take effect ten (10)days after the City Council
has certified the results of the General Municipal Election by resolutign.
SECTION 5. This order shall take effect accorfiig to law ten days after certification of
the election al which it is adopted.
309
ATTACHMENT #3
Letter from Cannabis Ad Hoc Committee Members, Dan Kalmick and Rhonda Bolton
TO: THE HONORABLE MAYOR AND CITY COUNCIL
FROM: RHONDA BOLTON. CITY COUNCIL MEMBER
DAN KALMICK, CITY COUNCIL MEMBER
DATE: FEBRUARY 24, 2022
SUBJECT: Recommendation for Council on March 1 Special Tax Vote
Honorable Mayor and Councilmembers,
As you know, the City has received two petitions (to date) seeking ballot questions on an
ordinance to allow retail cannabis sales within the City, and we have expressed a desire to
stay ahead of such efforts so that we can craft a proposed measure that is tailored to the
needs and expectations of our City. In light of these factors, it is our opinion that taking
incremental steps on Cannabis policy is the most prudent and deliberate approach to
accomplish these policy goals.
The first step is placing a Special Tax measure on the ballot for the June primary thus allowing
our residents to weigh in on whether they want Cannabis legally taxed in Huntington Beach.
We feel that a tax not to exceed 6°% would be appropriate.
To pass, a Special Tax will require two-thirds of residents to agree. This will signal to Council,
early in the process, that a super majority of our residents agree with the policy direction. We
believe that the Special Tax should be directed towards Public Safety/ Education and
Homelessness. These are the top quality of life concerns for residents and any additional
revenue streams should be directed to those two top priorities, consistent with the Council's
previously articulated Strategic Planning Goals.
Asking voters to approve the tax in June will also stunt the two proposed third-party voter
initiatives and allow our Cannabis Ad Hoc Committee to continue to work with Council on
crafting an ordinance and regulations specific to Huntington Beach. Note that voting to place
the Special Tax on the ballot for June does not preclude the Council from placing the
completed ordinance on the November ballot if the Council decides it does not want to pass
the ordinance and adjust land use through the regular process (Planning Commission and City
Council Public Hearings).
We have plenty of additional work to do on this topic and this is the first step. We ask that
Council vote to place the Special Tax on the June ballot.
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sO�`••• 0•
4
i � Jar
I
City of Huntington Beach
Cannabis Business Tax
Ballot Measures " s
City Council Meeting
e i March 1, 2022 p�
Background - City of Huntington Beach
• The City prohibits medical and recreational cannabis activities in the City.
o Exception:allowing/regulating nonmedical marijuana cultivation per a private
residence up to six plants
• As of now, two private parties have filed separate cannabis petitions requesting that
the City prepare documents allowing their proposed regulations to be placed before
the voters of Huntington Beach for consideration.
o November 3 - Huntington Beach Cannabis Taxation and Regulation Act
o December 2 - Huntington Beach Cannabis Regulation&Land Use Measure
• Such initiative measures proposing legalization, taxation, and regulation of commercial
cannabis businesses in HB were created without City Council or staff input.
• ^ y
Ss
;�NTAL
IiUNICATION
McOr'yJ Data. /ZZ/ —
Agenda Item No.�
3 4
s/1/2022
Background - Continued
• On December 21, 2021 Study Session, the City Council formed an ad-hoc
subcommittee to further assess, research and present a balanced cannabis
regulation framework for the Council's consideration.
• An Ad hoc subcommittee of 3 City Council members consisting of City Council
members Bolton, Kalmick, and Peterson,was formed. The subcommittee met
twice to deliberate key policy areas and make recommendations.
• On February 15, 2022 Study Session, the City Council held to discuss the
recommendations by the subcommittee and deliberated next steps.
Special Tax vs. General Tax
June 7, 2022 Primary Election Ballot as a Special Tax
• Requires 23 votes of the electorate
• Tax Revenue must be deposited into a separate fund only be used for
specific purposes. Proposed purposes are:
1. Police services and:
2. Behavioral health and homeless prevention & intervention services
• Estimated election cost: appx. $317,000 to $450,000 per the OC
Registrar of Voters based on the number of registered voters. The final
cost will depend on the total # of entities placing items on the ballot, etc.
0
2
3/1/2022
Special Tax vs. General Tax
November 8, 2022 General Election Ballot as a General Tax
• Requires a majority of the electorate
• Tax Revenues will be used for general municipal services
• Estimated election cost: appx. $8,500 to $25,500 depending on the # of
ballot pages required as the City is committed to the upcoming City
Council and City Attorney elections
• A Resolution calling for a general tax to be placed on a general municipal
election - requires 2/3 of the City Council votes.
0
Proposed Tax Rates
• Up to 6%for retailers (storefront, delivery and both); and
• Up to 1% for other cannabis businesses (non-retailers including but not
limited to indoor cultivation, manufacturing, testing lab, and distribution);
and
• Allowing flexibility for the City Council to adjust tax rates up to a
maximum voter-approved rate for each type of cannabis businesses to
address yet emerging economic market conditions
3
3/1/2022
City of Huntington Beach -
Cannabis Business Tax Measure - Special Tax
"Shall the City adopt a special tax measure of up to 6%of
gross receipts on cannabis retailers and up to 1%of gross YES
receipts on all other cannabis businesses, which is expected to
generate an estimated $300,000 to$600,000 annually for the
specific purposes of funding police and homeless and NO
behavioral health services, and levied until terminated by
voters?
Timeline for June Election as Special Tax
• March 11, 2022: Submit Direct Argument
• March 11, 2022: Submit an Impartial Analysis of the Measure by CAO
• March 21, 2022: Submit Rebuttal Argument
• Council as a whole,or any member of members authorized by the City Council may submit
ballot arguments, for or against the measure pursuant to Elections Code section 9281 &9282.
• Council can designate from this body less than a quorum to draft and submit a direct argument
supporting the measure.
• In the event such a Council authorized argument is not prepared, individual voters (including
Council Members) can submit an argument, and a priority is set forth by Election Code Section
9287 to be applied by the City Clerk in selecting the ballot argument to use.
g x
4
3/1/2022
Recommended Actions:
If the City Council wishes to put a tax ballot measure before voters in June as a
special tax:
A) Adopt Resolution No. 2022 07, calling for a Special Election to place a special tax measure on
the June 7, 2022 Statewide Primary election ballot,and,
B) Direct staff to schedule a future meeting date at which the City Council can further consider the
implications of various unresolved policy/regulatory matters associated with cannabis, after
which time the City Attorney can prepare and return to the City Council for its consideration, a
regulatory ordinance regarding cannabis regulations for City Council adoption or voter
approval and
C) Authorize a General Fund appropriation of up to$45Q000 for the OC Registrar of Voters to cover
all associated election costs related to placing the measure on the June 7, 2022 ballot:and
Di Designate from this body less than a quorum to draft and submit a direct argument supporting
',,w,:S'Z"; She measure.
Recommended Actions:
If the City Council wishes to put a tax measure before voters in November as a
general tax:
1) Direct staff to return to the City Council with a resolution to place a cannabis tax meaure on
the November ballot;and,
2) Direct staff to schedule a future meeting date at which the City Council can further consider
the implications of various unresolved policy/regulatory matters associated with cannabis,
after which time the City Attorney can prepare and return to the City Council for its
consideration, a regulatory ordinance regarding cannabis regulations for City Council
adoption or voter approval.
If this option is selected, the cost of election will be budgeted in the FY2022-23 budget.
? 4{
5
��NTINGT�
\HppPPO Rqr •�F
QUESTIONS?
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6