Mendocino County Faces Legal Challenge Over Marijuana Business Tax

A marijuana business tax approved by voters in Mendocino County last year is now the subject of a lawsuit filed by seven cannabis business owners. The plaintiffs are challenging the legality of the measure, arguing that it should have required a vote by two-thirds of residents, rather than a simple majority.

At issue are two initiatives: Measure AI which imposes a 2.5 percent tax on cannabis enterprises and Measure AJ, a companion measure that requires the county to spend most of the revenue on specific public services. It’s the companion measure that has thrown this whole initiative for a loop.

The effort was billed as a general tax, which is why it was able to pass with a majority of voter support. However, the plaintiffs argue that its ties to specific spending priorities make it a special tax, which must meet the two-thirds threshold.

The Ukiah Daily Journal explains why the suit could be significant.

The lawsuit, if successful, would upend a compromise that members of the Planning Commission and the Board of Supervisors have embraced as a way to please both law-abiding cultivators and residents fed up with the hostile atmosphere that outlaw growers have introduced into their neighborhoods.

Members of the commission and the board have softened a general ban on cultivation in residential neighborhoods by allowing existing grows to operate for two years after passage of the still-developing Medical Marijuana Cultivation Regulation, but neighbors, outraged by the aggressive guard dogs, excessive traffic, unsightly fences, and lawlessness they have endured, have insisted on the immediate prohibition of grows in all neighborhoods.

Officials kept the two-year grace period but have pledged aggressive enforcement of the law’s provisions, which would presumably cull the stubbornly non-compliant elements of the industry. The funding needed to do so would come from revenue collected under the marijuana-business tax.

The plaintiffs are also calling the basis of the tax unfair because, as law-abiding cultivators, they have nothing to do with the illicit operators county officials have vowed to crack down on.

Katharine Elliot, general counsel to the county, is confident the courts will uphold the tax. She points to a similar tax upheld by the Superior Court of Santa Clara. But don’t be so sure, the plaintiffs’ attorney says. He believes the issue could eventually make its way to the California Supreme Court.