The Santa Barbara City Council approved an ordinance to increase cannabis business taxes by 2% in a 5-2 vote during its March 17 meeting.
The council approved raising the tax on non-medical cannabis retailers from 6% to 8%, with the new rate taking effect July 1, 2026. The increase applies to both storefront and delivery-only businesses, while medical cannabis remains taxed at 6%.
City officials cited the General Fund deficit as a key reason for the increase, estimating it could generate between $125,000 and $300,000 annually. The council also directed staff to explore additional measures to address budget shortfalls.
Tax Increase Approved to Address Budget Deficit
The council also reviewed the overall tax burden on cannabis purchases. With the increase, the total effective tax rate is expected to rise to about 36%, including the local cannabis business tax, a 9.25% sales tax, and a 15% state excise tax…