DLNews Biz News:
Desert Hot Springs is poised to reduce its cannabis retail tax from 10% to 5%, aligning with other Coachella Valley cities to support a beleaguered industry. The City Council’s unanimous decision on April 8 directed staff to draft an ordinance for the tax cut, with a public hearing scheduled for April 15th to consider the measure.
The proposed reduction comes as cannabis businesses face mounting financial pressures, including market saturation, competition from illicit operators, high taxation, and significant security costs. Ibrahim Robbin, owner of IVTHC dispensary, emphasized the challenges, stating that the lower retail tax would help keep businesses open and residents employed.
Desert Hot Springs has already taken steps to alleviate the burden on cannabis cultivators. In 2024, the city permanently lowered its cultivation tax from $10.20 to $5.75 per square foot, following temporary reductions in previous years. Additionally, the city implemented monthly tax payments and introduced waivers for crop losses to provide further relief.
Other Coachella Valley cities have enacted similar measures. Palm Desert reduced its retail cannabis tax from 10% to 5% in March 2023, responding to declining sales and increased competition. Cathedral City also adjusted its tax rates, imposing a 5% tax on gross receipts for dispensaries and varying rates for cultivation and manufacturing. Palm Springs, facing an oversaturated market with 26 operating dispensaries, halved its retail cannabis tax and extended a moratorium on new dispensary licenses until 2028.
These tax adjustments reflect a regional trend to sustain the legal cannabis market amid economic challenges. Desert Hot Springs anticipates a reduction in cannabis tax revenue from $1.5 million in 2024 to a projected $1.2 million in 2025. However, city officials believe supporting the industry’s viability is crucial for long-term economic stability.
The upcoming public hearing on April 15 will provide an opportunity for community input on the proposed tax reduction. If approved, the ordinance will formalize the tax cut, positioning Desert Hot Springs alongside neighboring cities to foster a more supportive environment for legal cannabis businesses.
