Sacramento cannabis business owners sue city over fee they say violates state, federal law
The city of Sacramento is violating state and federal laws by charging a fee to cannabis business owners, a lawsuit alleges.
A group of Sacramento pot cultivators, distributors, manufacturers and retailers — with gross revenues in excess of $300 million and thousands of employees — filed the lawsuit earlier this month in Sacramento County Superior Court.
The city charges cannabis business owners a fee of 1% of their gross receipts, to be used to mitigate adverse impacts on the area the business is causing. The money is used for what’s called the Neighborhood Responsibility Plan program.
That fee is actually a special tax, meaning it should have been approved by voters by a two-thirds vote under the California Constitution, the lawsuit alleges. The finding that fees are necessary to mitigate negative impacts from business activities in the first place is unsupported, violating the California Mitigation Fee Act, the lawsuit also alleges.
And the 1% fee constitutes an “undue burden on commerce,” in violation of the state and federal constitution, the lawsuit alleges.
“The City has masqueraded this ‘fee’ as a ‘Neighborhood Responsibility Plan,’ and has claimed the fee is necessary to mitigate alleged negative impacts from novel business activities,” the lawsuit stated. “These claims are false. Simply put, the city has taken advantage of an industry that works especially hard to subdue often misplaced public criticism.”
The city declined comment on the lawsuit because it has not yet been served with it, city spokesman Tim Swanson said.
The city had received about $2 million from the fee through June 2020, Swanson said. It has not yet spent any of the funds, Swanson said.
“The city is determining how to best use the funds from this program,” Swanson said in an email.
The city charges the 1% fee in addition to a business operation tax on cannabis businesses of 4% of gross receipts, approved by Sacramento voters in 2010.
The plaintiff for the lawsuit is 6492 Florin Perkins LLC. That’s the address for Metro Cannabis Company in south Sacramento, owned by Brian Galleta.
The lawsuit asks a judge to order the city to stop collecting the 1% fee and for damages to the business owners.
