Hundreds of Cannabis Farmers in Humboldt County Face License Loss Over Unpaid Tax Debt
March 31 Deadline Looms for Humboldt County Cannabis Farmers
Hundreds of cannabis growers in Humboldt County, California, are at risk of losing their business licenses due to unpaid cultivation taxes. As the March 31 deadline approaches, farmers must clear outstanding debts associated with Measure S, a tax referendum passed by voters in 2016.
The financial strain on small cannabis operators has been compounded by a downturn in the industry, making it difficult for many to meet their tax obligations. With more than 75% of the county’s cultivation permit holders carrying some level of tax debt, the consequences could be severe for those who fail to comply.
Millions in Unpaid Taxes Threaten Humboldt’s Cannabis Industry
According to county data, cannabis cultivators in Humboldt collectively owe over $17 million in unpaid taxes, primarily from 2017 to 2021. Individual debts range from an average of $12,000 to more than $150,000 in some cases.
This issue is not unique to Humboldt County. Statewide, cannabis businesses owe over $1.3 billion in unpaid taxes and related penalties. This massive tax burden reflects the economic challenges that licensed operators face in a highly regulated and competitive market.
Hundreds of Growers Face License Revocation for Non-Payment
Out of the 765 registered cultivation permit holders in Humboldt County, 415 have agreed to payment plans to settle their debts. However, 350 permit holders have made no arrangements, putting their licenses at risk.
Many of these growers have ceased operations, abandoned their properties, and ignored tax obligations. With county officials unable to locate these individuals, their fate appears sealed. The county’s Board of Supervisors is set to discuss possible enforcement actions, including license suspensions and revocations, in an upcoming meeting on March 25.
Measure S Tax Structure and Its Impact on Farmers
In 2016, Humboldt County voters approved Measure S, establishing a three-tiered cultivation tax:
$1 per square foot for outdoor grows
$2 per square foot for mixed-light grows
$3 per square foot for indoor grows
At the time, optimism surrounded California’s transition to a legal cannabis market. However, the anticipated growth never fully materialized. The combination of excessive taxation, regulatory burdens, and market contraction has made it increasingly difficult for small growers to survive.
Declining Dispensary Numbers and Market Challenges
Over the past few years, the legal cannabis market in California has faced significant setbacks. The number of active dispensaries has dropped from around 1,200 to between 800 and 900. Additionally, nearly 60% of California municipalities still prohibit cannabis retail businesses, limiting market access for growers.
In response to these difficulties, Humboldt County suspended Measure S taxes for two years in 2022. The excise tax rate was reduced to:
10 cents per square foot for outdoor grows
20 cents per square foot for mixed-light grows
30 cents per square foot for indoor grows
Despite these adjustments, many farmers continue to struggle with financial instability.
Budget Shortfalls Put Pressure on Local Government
Humboldt County, like many jurisdictions across the state, is grappling with a budget shortfall. Federal funding reductions and declining tax revenues have forced the county to consider layoffs and other spending cuts.
With financial pressures mounting, county officials may be less inclined to offer additional relief to struggling farmers. The need for tax revenue to support public services is competing with the economic realities facing cannabis cultivators.
Growers Seek Payment Plans and Debt Forgiveness
Many cultivators are looking for alternative solutions to manage their tax burdens. Some farmers have proposed interest-free payment plans, while others hope for partial debt forgiveness.
Businesses like Talking Trees Farms, which has transitioned from indoor to outdoor cultivation to cut costs, have been hit particularly hard. Retailers and distributors owe the company substantial unpaid invoices, creating cash flow problems that make it difficult to cover tax obligations.
Calls for Incentives for Farmers in Compliance
Not all cultivators are struggling with tax debt. Some, like Mattole Valley SunGrown, have prioritized paying their taxes to avoid license revocation. These growers argue that those who have remained in compliance should be rewarded with incentives.
Humboldt County officials have acknowledged this suggestion but have not yet outlined any plans to implement incentives for compliant businesses.
Upcoming Decision Could Shape the Future of Humboldt’s Cannabis Industry
With the March 31 deadline fast approaching, the fate of hundreds of cannabis farmers in Humboldt County remains uncertain. The Board of Supervisors’ March 25 meeting will play a crucial role in determining whether additional relief measures will be introduced or if license suspensions and revocations will proceed.
The outcome of this decision could have lasting impacts on Humboldt County’s cannabis industry and the broader legal market in California. For many farmers, the next few weeks will be critical in determining whether they can continue operations or be forced to shut down.
