Eugene Denson, Cannabis Advocate and Attorney’s, FULL LETTER Sent to Humboldt County Board of Supervisors Regarding Measure S Commercial Marijuana Tax Illegality



POB 158, Alderpoint, Ca 95511 USA

707-923-4764, Fax 707-926-5250

Jan 8, 2018


Humboldt County Board of Supervisors

825-5th St

Eureka, Ca 95501

Dear Board Members:

In November 2016 the voters of Humboldt County approved Measure S, The Commercial Marijuana Tax Ordinance. December 13, 2016, you incorporated the text without change into the County Code as Ordinance 2567. It became Sections 719-1 to 719-15. In June 2017, you passed Ordinance 2575, which changed the Measure S text in various ways. Some changes resulted in an improper increase in the amount of tax, and an improper broadening of the scope of the tax, both of which are expressly forbidden in section 719-9 of Measure S, and the same section in the county code.

Moreover, the alterations to what is taxed, and who must pay the tax, have effectively created a new tax in place of the Measure S tax approved by the voters. Government Code section 53723 prohibits the County from levying a general tax without approval by a majority of the voters. Since no voters have approved this new tax, its imposition is a violation of Government Code section 53723.

I am therefore calling on you to take the following actions:

  1. Immediately repeal the alterations made by Ordinance 2575 in section 719-3 (“Definitions) 719-4 (Imposition of Tax) and 719-6 (Collections and Remittance).

And to minimize avoidable damages:

2. Instruct the County Treasurer-Tax Collector to send no tax bills based on Ordinance 2575, nor collect any taxes that are based on Ordinance 2575, as those taxes are illegal.

  1. Instruct the Director of the Planning Department to alter item 3 (“Taxation, page 4) of the Interim Permits for Existing Commercial Cannabis Cultivation that he issues, or has issued, by adding to the end of that item the words “as set forth in Measure S.”

The violations of Measure S in Ordinance 2575 include:

1. Changing the basis of the tax: Measure S, as originally worded, and as passed by a majority of the voters, imposed a tax on “each person engaged in legally authorized commercial marijuana cultivation….” That tax was based on the square footage of that person’s cultivation area. (Section 719-4).

Cultivation area in turn was defined twice in Section 719-3 (b). First to be “the sum of the permitted area(s) of marijuana cultivation as measured around the perimeter of each discrete area of marijuana cultivation on a single premises, as defined herein. And, it was defined again as “Area of cultivation is the physical space where marijuana is grown and includes, without limitation, garden beds or plots, the exterior dimensions of hoop houses or greenhouses, and the total area of the pots and bags containing marijuana plants on the premises. Neither of these definitions alone or together is very clear, and the interpretation of them probably will have to be worked out in the courts unless the tax is collected on the honor system. However, it is clear that the voters instituted a tax on the actual space on the ground that is being used to cultivate marijuana commercially.

In your revision of the Measure S you threw this section out and replaced it with 719-3 (c), “’Cultivation area’ shall mean the cultivation area stated on the… permit.” You then added a sentence to 719-4, the imposition of the tax, to say the tax was due on any permitted property, “regardless of whether or not marijuana is actually grown on such property.”

The effect of these changes is to broaden the scope of the tax from being a tax on actual cultivation area to being a tax on the permitted area whether cultivated or not. Since some people actually cultivated less than the permitted area, and some people with permits did not cultivate at all, the scope of the tax is now broadened to include an unknown amount of land that is not being used for commercial marijuana cultivation. This basis for the tax goes well beyond Measure S, the scope of which was clearly confined to actual cultivation space, however poorly defined. Section 719-9 prohibits expanding the scope of the tax in any way so this alteration is illegal.

These alterations of the ordinance also increase the amount of the tax. As the tax formula is taxable square footage times the rate for the type of cultivation, bringing the permitted, but uncultivated land, into the taxable area increases the amount of the tax. Section 719-9 prohibits this also.

2. Changing the Taxable Period: Measure S says in Section 719-6, “taxes shall begin to accrue on the date on which a person becomes engaged in legally authorized commercial marijuana cultivation….” That is to say, the date they get their permit, or the date they start cultivating under that permit, whichever is later. The point of setting the date precisely is that the tax would be pro-rated for the amount of the year in which the taxed activity took place. Thus if a person got a permit Dec 1, 2017 and began cultivating on that date, that person would owe 1/12th of the annual tax.

Ordinance 2575 deleted the portion of section 719-6 just quoted, replacing it with, “…taxes shall be owed for each and every year in which a commercial marijuana permit is issued….” This replacement increases the amount of the tax considerably by charging the tax on periods of the year in which the permitted person is not engaged in commercial marijuana cultivation as defined in Section 719-3(a) (“Commercial Marijuana Cultivation”) which defined cultivation as commencing with “planting” and ending with “grading or trimming.” This increase in the amount of the tax is prohibited by section 719-9.

The replacement also broadens the scope of the tax in two ways. First, from being a tax on cultivation to being a tax on cultivation permits, and, secondly, from being a tax that begins to accrue when a permitted person commences cultivation, to an annual tax independent of the actual cultivation period. This broadening of scope is prohibited by section 719-9.

3. Changing the Person who must pay the tax: When the voters passed Measure S they imposed a tax on “each person” who has a permit. (Section 719-4). Ordinance 2575 deleted those words, replacing them with words that altered the person upon whom the tax is imposed, from the cultivator to the property owner. Section 719-4 now reads the tax is imposed on, “each property owner whose property is subject to a… permit.

The voters did not vote to tax the property owners, and by imposing a tax on them you have broadened the scope of the tax to include persons who do not cultivate marijuana. The tax bills will be an unpleasant surprise for property owners who have leased their land to persons who have applied for permits. This broadening of the scope of the tax is prohibited by section 719-9.

Violation of Government Code Section 53723. Government Code 53723 says, “No local government, or district, whether or not authorized to levy a property tax, may impose any general tax unless and until such general tax is submitted to the electorate of the local government, or district and approved by a majority vote of the voters voting in an election on the issue.”

Ordinance 2575 imposes a tax on property owners if their property is permitted for commercial marijuana cultivation. The changes wrought by Ordinance 2575 have not been “submitted to the electorate of the local government” and no “majority vote of the voters voting in an election on the issue” has approved it. There has been no vote on the new tax at all. Neither taxing property owners, nor using the size of the maximum space of cultivation permit as a basis for tax, has been presented to the voters for their approval. The changes Ordinance 2575 made in Measure S are so fundamental and extensive that they amount to a new and different tax replacing the tax that the voters approved.

I imagine you are aware of Government Code section 53728, which says that a tax imposed without complying with the requirements of this Article, shall have its imposer’s allocation of property tax reduced by the amount improperly collected. In addition any citizen or taxpayer may maintain an action to invalidate the tax.

No Cultivator is in Compliance with Federal Law. The ballot initiative, Measure S, was not well written, as you are probably now aware. I have to inform you that because of the language in 719-3 (a), and 719-6 requiring an activity being 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 see that the language of Measure S, which you wrote, has some awkward wording that may make it more difficult to put into effect than you realized. But you can’t just change what the voters passed because you have determined now that you should have written the Measure differently. The proper way to bring into law the scheme you now feel more effective, is to repeal Measure S and replace it with a Measure that you feel solves the problems you have encountered.

I am sending a copy of this letter to County Counsel, Jeffrey Blanck, in case you wish to consult with him about the legal points I am raising. If you, or County Counsel, wish to discuss any of these points with me, I am available.


Yours truly,

Eugene Denson, Esq.


Cc: County Counsel, Jeffrey Blanck

2 thoughts on “Eugene Denson, Cannabis Advocate and Attorney’s, FULL LETTER Sent to Humboldt County Board of Supervisors Regarding Measure S Commercial Marijuana Tax Illegality

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