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"Dream Tax"
Continues from front page.
I had an extensive interview with County Counsel
Jeff Blank, where I asked him to speak about the
allegations, in addition to what he would say to the
landowners who rented out their land to somebody
thinking they would be liable for the tax? Blanck States,
“All of what we did is consistent with what the voters
approved, because if you get a permit it runs with the
land, not the individual. The permit requires a signature
by landowner, so nobody gets a permit unless the
landowner has signed off on it.
It’s a tax on the right to do business… it’s an excise tax
for a specific purpose... This is a tax on your ability to be
able to grow, its like a business license and based on
what you said you were gonna to do that is what you are
taxed on, whether you do that or not is your choice.
How much $ you make -we don’t get involved in any of
that. And if you stop at any point in the year that is up to
you. Obviously don’t get a permit if you are not going to
grow…There is no proration, you pay the taxes for that
year, that’s all up front. The second ordinance just
clarified how we were going to do it.”
Looking back on busts and public announcements
made by government officials helps one to see why one
could be confused about what they were signing up for
exactly, a bust featured on Kym Kemp’s Blog in June
2016 states.
“On Tuesday, June 13, officers from the Department of
Fish and Wildlife supported by deputies from the
Humboldt County Sheriff’s Office served a search
warrant on a property … that had applied for a cannabis
cultivation permit near Blocksburg in southeastern
Humboldt. According to Andrew Hughan, Public
Information Officer for the Department of Fish and
Wildlife, “[Although], the people had applied for a
permit…until you have a granted permit you are
growing illegally.
Some cultivators wonder how and why they are being
taxed by the county for cultivating, especially in 2016 or
2017, for doing something that same county is
enforcing and deeming “illegal.” This bust rhetoric in
June contrasts what cultivators were being told in
County Press releases in December and what they are
being billed for now so many cultivators feel “tricked.” A
Humboldt County Press release from December 17
2016 states, "If you are planning on operating locally
as a cannabis cultivator in 2017 you must submit
your application to the Planning & Building
Department’s Cannabis Services Division no later
than Friday, Dec. 30. This deadline also applies to
individuals seeking permits for other commercial
cannabis activities including: manufacturing,
processing, wholesale distribution, or nurseries.
Beginning Jan. 1, 2017 no new applications for local
permits will be accepted by the county until after an
Environmental Impact Report is completed and the
Board of Supervisors enacts a new local ordinance."
This County Press Release specifically states that one
who applies for a Permit by Dec 30, 2016, is doing so if
they plan to “operate locally as a cannabis cultivator in
2017. To this day no new permits have been issued,
although it is now considered likely, it is only
speculation.
I asked Blanck if the Board of Sups and County
Counsel considered being flexible on the farmers who
applied in late Dec 2016, those who potentially didn’t
realize when they rushed in to get a permit at the end of
the year, they were also signing up for taxes for both
2016 and 2017 regardless of if they even began
cultivating.  “We have had discussions about that and
we are like -no, we are going to be fairly rigid about the
tax. The language, we didn’t put it in there to be
pro-rated, its simply saying its triggered by you getting
the permit and that year you pay the taxes… The tax
can’t be retroactive… You might have changed your
mind but that doesn’t change our policy.”
One local explains, “These illegal tax bills are being sent
to interim permit holders who are not yet approved to
grow cannabis …If not paid within 30 days, they are
assessed a 25% penalty and additional 10% for every
30 days after that!”  Bills range from a few thousand
to hundreds of thousands of dollars.
I asked Blanck to respond to small farmers who say
they are struggling to keep up with the costs of coming
into compliance, such as those who spoke at the
January 6 2018 Planning Department meeting? I think
what you have here is an industry that was totally
unregulated and now their coming in for the regulations
somewhat kicking and screaming, even though earlier
on they said they want to be taxed and be legit. Well
yeah there is a lot of taxes and fees that all businesses
pay. Now their finding out what they are saying well I
can't afford to stay in business. Obviously they’re going
to make more money if the government stayed out of
their business entirely. That's the nature of doing
something illegally its pure profit after expenses.”
I asked Blanck to speculate on how folks are
transitioning to legal cultivation, the Cannabis Market
Collapse and the state of the underground,” “What's the
price per pound I don't know, speculating on the market
technically that would constitute a collapse but I have
no idea of how that plays out one way or the other. If we
have an estimated 15k grows the amount of people who
have come in for permits is like 10-20%. So we have a
bunch of people growing and selling out of state where
it's 5X the price. So the underground economy isn't
going away this year."
I also asked Blanck to comment on the reports of 10k
sq. ft. farms said to be ‘just enough to get by’ with
permit costs and how he saw these market changes
impacting small farmers, the local economy, Blanck
said, “I’ll call them the small business owner, or
cultivator, yeah there is some economy to size that goes
along with this and the pricing but for the new grows
hopefully they have sat down and planned all of this out
to figure out how to make money… Restaurants come
to mind, I think 80% fail in the first year…. For the
existing grows we looked at it and said -you’ve been
growing for years and not paid a dime, now if you
want to keep doing it and your telling us your going
to put me out of business, well you’ve already been
in business and paid nothing. They should have
always had to comply.”
I asked Denson how he felt about the cultivation tax and
why he thought the Measure S had just under 2/3 voter
approval he said,
“They sold it misleadingly, they acted as though it were
a tax that benefits the people in things they like such as
child advocacy, rural ambulances, things like that, when
in fact it just get s dumped in the general fund. I have a
feeling that if it were put on the ballot now it wouldn’t
pass. … I think the whole tax is a bad idea, it’s a
disincentive to legalize. It s a tax you have to pay even if
the crop fails. Its not a tax on what your making, it’s a
tax on what your hoping to make- a dream tax…”
Amy Nielsen the County Administrative Officer advises
to the Board that “only ‘non-substantial’
changes can be made to the ordinance in the
future… In the instance of crop loss, we would
hope that folks have insurance ... and if you’ve
only planted 5,000 square feet on your
10,000-square-foot grow, then hopefully we’d
work though that with our agricultural
commissioner and he can verify that that has
www.greenfuse.work
occurred.”
Attorney ED Denson continues to explain how this tax
impacts the market and compliance, “They sold it
somewhat as a way to discourage illegal growing, but
it’s a way to encourage illegal growing because the
illegal growers aren’t subject to the tax. They run
the risk of getting arrested or something but if they
run a clean operation all they are really risking is
misdemeanor probation.  What the county should be
doing is making the legal market more enticing not less.”
When I inquired to Blanck as to whether he sees the
Measure S tax having any impact on the effectiveness
of compliance he explained, “Its not forcing the
[underground market] all to pack up and leave
obviously... the State says this could take up to ten
years… But now we have fines and penalties, like the
10k a day fine which has an impact on property
owners.”
Denson also highlights in his recent letter to the Board
of Supervisors that in 719-3 (a), and 719-6 of Measure S
it requires, “an activity be in compliance with Federal
law and regulation in order to be defined as commercial
marijuana cultivation or for the tax to begin to accrue.
There is almost certainly no person or property owner in
Humboldt County who owes any tax under either
version of the Measure S ordinances. The voters passed
Measure S as written and these sections requiring
compliance with Federal law are part of it.“ I asked how
does somebody become federally compliant, Denson
responds, “You get a research permit with Department
of Justice, there are about four or five of those I think.
Also there is a farm in Mississippi where the FEDs grow
their pot and still supplying patients with today.”
Blanck responds to the claim of no one owes taxes
because no one is likely federally compliant, “ Yeah it
was ‘applicable Federal Regulations’ which there aren’t
any, the FEDs just have it on Category One Illegal Use,
all we are saying is that if the FEDs start regulating
it, you have to comply with our ordinance and
Federal Regulations as well. So that statement was
taken out of context. I think the FEDs are allowed to tax
illegal activities for Federal purposes,
I asked Blanck to comment on the less than 1% risk of
getting busted coupled with the costs and complexity
of compliance, and how he feel that’s going to balance
out. He explains that turning your neighbors in, is a
method, which has been effective in other industries,
and, “The criminal enforcement will still continue, for
those who qualify for crimes and can be prosecuted,
those without permits. We have civil fines now where if
we see you growing we can send you notice of a fine,
which is much simpler than sending out the sheriff to
raid the property. I think the disincentive would be if
your neighbor went through the process and the guy
next door is growing and doesn’t have a permit to do it,
Code Enforcement will come by.
And that’s worked in a lot of other industries where
someone says well I’ve got to go through all of this
and so should you.”
The Measure S tax revenue is added to the General
Fund, which is overseen by the Board of Supervisors.
Where it will be spent is still being determined.  
-SHAKTI
For Full Disclosure this
Freelance Journalist is
studying law with
Attorney ED Denson.