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HomeMy WebLinkAboutItem 08 Ordinance and Agreement Regarding Collection, Enforcement, Administration and Distribution of the Local Marijuana Gross Receipts Tax AGENDA ITEM SUMMARY Meeting Date: 12/5/2016 Meeting Type: Regular Meeting Staff Contact/Dept.: Bob Duey/Finance Staff Phone No: 541-726-3740 Estimated Time: 10 Minutes/Public Hearing S P R I N G F I E L D C I T Y C O U N C I L Council Goals: Financially Responsible and Stable Government Services ITEM TITLE: ORDINANCE AND AGREEMENT REGARDING COLLECTION, ENFORCEMENT, ADMINISTRATION AND DISTIBUTION OF THE LOCAL MARIJUANA GROSS RECEIPTS TAX. ACTION REQUESTED: Hold a Public Hearing and first reading on AN ORDINANCE AMENDING THE SPRINGFIELD MUNICIPAL CODE SECTIONS 7.1001, 7.1002, 7.1004, 7.1005, AND 7.1011 THROUGH 7.1014 TO INCORPORATE STATE MARIJUANA TAX PROVISIONS FOR THE COLLECTION, ENFORCEMENT, ADMINISTRATION AND DISTRIBUTION OF THE LOCAL MARIJUANA GROSS RECEIPTS TAX, REPEALING SECTIONS 7.1006-7.1010, AND CONTAINING A SEVERABILITY CLAUSE. No Action. First Reading Only. And Approve/Not Approve motion to authorize the City Manager to sign an agreement with the State of Oregon to collect and distribute to the City of Springfield taxes owed by the enactment of a 3% local tax on the sales of recreational marijuana. ISSUE STATEMENT: At the November election, local voters passed a measure allowing a 3% local gross receipts tax on the sale of recreational marijuana and related products. To satisfy State requirements the City must amend local ordinances to align itself with the program requirements. This was known at the time of the ballot but was delayed until the actual passage of the measure. In addition, staff is recommending that the City contract with the State for the collection and distribution of tax money owed by the in-city retailers of recreational marijuana. ATTACHMENTS: 1.) ATT 1 – Council Briefing Memorandum 2.) ATT 2 - Ordinance MJ Gross Receipts Tax with Exhibit A 3.) ATT 3 - State Marijuana Tax Collection Agreement DISCUSSION/ FINANCIAL IMPACT: See Council Briefing Memorandum M E M O R A N D U M City of Springfield Date: 11/28/2016 To: Gino Grimaldi, City Manager COUNCIL From: Bob Duey, Finance Director BRIEFING Subject: Recreational Marijuana Local Tax Collections MEMORANDUM ISSUE: At the November election, local voters passed a measure allowing a 3% local gross receipts tax on the sale of recreational marijuana and related products. To satisfy State requirements the City must amend local ordinances to align itself with the program requirements. This was known at the time of the ballot but was delayed until the actual passage of the measure. In addition, staff is recommending that the City contract with the State for the collection and distribution of tax money owed by the in-city retailers of recreational marijuana. COUNCIL GOALS/MANDATE: Financially Responsible and Stable Government Services ___________________________________ DISCUSSION: The legalization of recreational marijuana within the State of Oregon is bringing many changes to both State and local governments. One of these is the legislative decision to allow local jurisdictions along with the State an option to tax recreational marijuana sales that occurs within its jurisdiction. Prior to this legislative action it was probably going to be subject to a court interpretation as whether local jurisdictions would have the ability to enact a local tax in addition to the state tax. In an attempt to preserve the right to a local tax, Springfield amended its local municipal code prior to the state-wide vote to legalize recreational marijuana. Admittedly it was unknown if this would preserve that right over the soon to be passed state measure. Since the election the State has developed a taxing program that provided local governments an option for participating in taxing recreational marijuana that Springfield has taken advantage of by placing the 3% local tax option on the November ballot. In an abbreviated format the following are the changes occurring in the taxing recreational marijuana retail sales: Current Recreational Marijuana State Tax The State taxes recreational marijuana at 25% Medical marijuana retailers could apply for recreational sales licenses for dual sales while state wide rules for recreational retailers were being developed The City has enacted ordinances that requires medical and recreational marijuana retailers to apply for and receive a local business license The State shares 25% state tax revenue from recreational marijuana with all local jurisdictions in a manner similar to liquor and cigarettes on a state-wide per capita basis To date, no revenue has been received by the City as the State is still retaining funds for allowable start-up costs Attachment 1 – Page 1 of 2 Current Action In-Progress for Local Tax As of October 1, license requests could be submitted to the State for recreational marijuana retail sales The City ordinances are still in place to require medical and recreational business licenses The City voters approved the enactment of a 3% local tax on recreational marijuana effective January 1 The City must amend its local ordinances to both partially repeal the changes made prior to the state-wide ballot in 2014 and enact additional steps to meet State requirements for the local tax o The necessary changes have been drafted by the City Attorney’s Office and staff is presenting a first reading on December 05 and a second reading on January 03 On January 1 the State tax drops to 17% The State will share the 17% state tax revenue with local jurisdictions that have not enacted local ordinances banning the sales of recreational marijuana and will share the revenue based upon actual sales by licensed retailers in each community (no longer state-wide per capita) Currently the City has seen preliminary paperwork that indicates there could be up to 7 requests for local business licenses for recreational marijuana retail sales. The local tax can either be collected by the City or by the State under a contract authorizing the State as an agent of the City. Staff is recommending the City contract with the State for collections. All ordinance changes and a signed collection agreement are due to the State by January 15th. Collections by the State will be done quarterly with payment due to local jurisdictions within 60 days after the close of the quarter. The first indication of local sales and local tax generated will not formally be available until late May 2017. RECOMMENDATION The City Council asked and received authorization from citizens to enact a local 3% tax on the retail sales of recreational marijuana. The ordinance changes being presented are necessary to meet the requirement that State has for the collection, enforcement, administration and distribution of the local marijuana local gross receipts tax. Staff recommends that the Council holds a public hearing and first reading only on the adoption of the necessary ordinance changes for the local recreational marijuana tax. Staff also recommends that the Council authorize the City Manager to sign a contract with the State of Oregon for the collection and distribution of local tax revenues. Attachment 1 – Page 2 of 2 CITY OF SPRINGFIELD, OREGON ORDINANCE NO. ___________ (GENERAL) AN ORDINANCE AMENDING THE SPRINGFIELD MUNICIPAL CODE SECTIONS 7.1001, 7.1002, 7.1004, 7.1005, AND 7.1011 THROUGH 7.1014 TO INCORPORATE STATE MARIJUANA TAX PROVISIONS FOR THE COLLECTION, ENFORCEMENT, ADMINISTRATION AND DISTRIBUTION OF THE LOCAL MARIJUANA GROSS RECEIPTS TAX, REPEALING SECTIONS 7.1006-7.1010, AND CONTAINING A SEVERABILITY CLAUSE. WHEREAS, in 2014, Oregon voters passed Ballot Measure 91, which allowed adults 21 and older to use, grow, process, and sell limited amounts of marijuana for recreational purposes; WHEREAS, in 2014, the Council adopted Ordinance No. 6329, imposing a gross receipts tax on the sale of marijuana in the City of Springfield, the amount of tax to be set by Council Resolution; WHEREAS, in 2015, the Oregon Legislature passed House Bill 3400, under which the City of Springfield may impose a tax of up to 3% on the recreational sale of marijuana and marijuana items, and passed House Bill 2041 imposing a 17% state tax on the recreational sale of marijuana and marijuana items; WHEREAS, House Bill 3400 requires a municipal tax on the sale of recreational marijuana to be adopted by ordinance and referred to the electors of the City at a general election; WHEREAS, the Council adopted Ordinance No. 6356, imposing a 3% tax on the recreational sale of marijuana and marijuana items by a marijuana retailer within the City of Springfield; WHEREAS, the Council adopted Resolution 2016-23, referring the measure of Ordinance No. 6356 to the electors of the City at the November 8, 2016 general election, and the measure was approved by a majority of votes cast; WHEREAS, ORS 305.620 allows any state agency or department to enter into an agreement with a local government for the collection, enforcement, administration and distribution of local marijuana taxes; WHEREAS, the Council has approved an Intergovernmental Agreement between the City and the Oregon Department of Revenue that enables the Department of Revenue to collect, enforce, administer, and distribute of Springfield’s marijuana taxes under the Department of Revenue procedures and requirements for state marijuana tax collection, enforcement, administration, and distribution; and WHEREAS, amendments to the Springfield Municipal Code are required to align the marijuana gross receipts tax provisions with the Department of Revenue procedures and requirements for marijuana tax collection, enforcement, administration, and distribution: NOW, THEREFORE, THE COMMON COUNCIL OF THE CITY OF SPRINGFIELD ORDAINS AS FOLLOWS: Section 1. Chapter 7 BUSINESS of the Springfield Municipal Code, Sections 7.1001, 7.1002, 7.1004, 7.1005, and 7.1011 through 7.1014 are hereby amended as more particularly described and set forth in Attachment 1 attached hereto and incorporated herein by reference. Attachment 2, PAGE 1 of 2 Section 2. Chapter 7 BUSINESS of the Springfield Municipal Code, Sections 7.1006 through 7.1010 are hereby repealed. Section 3. Except as specifically amended herein, Chapter 7 shall continue in full force and effect. Section 4. Severability Clause. If any section, subsection, sentence, clause, phrase or portion of this Ordinance is, for any reason, held invalid or unconstitutional by a court of competent jurisdiction, such portion shall be deemed a separate, distinct and independent provision and such holding shall not affect the validity of the remaining portion hereof. ADOPTED by the Common Council of the City of Springfield this ___ day of _________, ____, by a vote of _____ for and ____ against. APPROVED by the Mayor of the City of Springfield this ______ day of __________, ____. _______________________ Mayor ATTEST: __________________________ City Recorder Attachment 2, PAGE 2 of 2 Ordinance Attachment 2 Exhibit A 7.1000 Purpose. For the purposes of this chapter, every person who sells marijuana in the city of Springfield is exercising a taxable privilege. The purpose of this chapter is to impose a gross receipts tax upon the retail sale of marijuana. 7.1001 Definitions. When not clearly otherwise indicated by the context, the following words and phrases as used in this chapter shall have the following meanings: Gross Taxable Sales. The total amount received in money, credits, property or other consideration from sales of marijuana that is subject to the tax imposed by this chapter. Marijuana. As defined in Section 7.1101 of this code. Marijuana Items. As defined in Section 7.1101 of this code. Marijuana Retailer. A person who sells marijuana items to a consumer in this state, including but not limited to a marijuana licensed by the Oregon Liquor Control Commission who sells marijuana items on or after January 4, 2016. Person. Natural person, joint venture, joint stock company, partnership, association, club, company, corporation, business, trust, organization, or any group or combination acting as a unit, including the United States of America, the state of Oregon and any political subdivision thereof, or the manager, lessee, agent, servant, officer or employee of any of them. Purchase or Sale. The acquisition or furnishing for consideration by any person of marijuana within the city. Retail Sale. The transfer of marijuana or marijuana items in exchange for any valuable consideration to a consumer. Tax. Either the tax payable by the marijuana retailer or the aggregate amount of taxes due from a marijuana retailer during the period for which the marijuana retailer is required to report collections under this chapter. Tax Collector. The Director of Finance for the City of Springfield or designee, which may include an official of the Oregon Department of Revenue or Oregon Department of Administrative Services. 7.1002 Levy of Tax. (1) A tax is hereby imposed upon the retail sale of marijuana items in Springfield and shall be paid by every seller exercising the taxable privilege of selling marijuana as defined in this chapter. The tax imposed by this section is a direct tax on the consumer, for which payment upon retail sale is required. The tax shall be collected at the point of sale of a marijuana item by a marijuana retailer at the time at which the retail sale occurs. (2) The amount of tax levied for recreational marijuana shall be 3% of the gross taxable sales of marijuana items by a marijuana retailer. Ordinance Attachment 2 Exhibit A 7.1004 Deductions. The following deductions shall be allowed against sales received by the marijuana retailer providing marijuana: (1) Refunds of sales actually returned to any purchaser; (2) Any adjustments in sales which amount to a refund to a purchaser, providing such adjustment pertains to the actual sale of marijuana and does not include any adjustments for other services furnished by a marijuana retailer. 7.1005 State Statutes Adopted. Each provision of ORS 475B.710 through ORS 475B.745, currently in effect, and all implementing regulations thereof, are adopted by reference and made a part of this chapter. All references therein to the Oregon Department of Revenue are deemed a reference to the Tax Collector for the City of Springfield. All obligations, responsibilities, and liabilities of marijuana retailers to the State of Oregon therein are deemed an obligation, responsibility, or liability to the City of Springfield. Violation of any provision therein shall be deemed a violation of this code per section 7.1011. 7.1011 Violation Infractions. (1) Violation shall constitute a civil infraction and shall be processed according to the procedures established in sections 5.600 through 5.626 of this code, Civil Enforcement of Code Infractions. It is a violation of this chapter for any marijuana retailer to: (a) Fail or refuse to comply as required herein; (b) Fail or refuse to furnish any return required to be made; (c) Fail or refuse to permit inspection of records; (d) Fail or refuse to furnish a supplemental return or other data required by the director; (e) Render a false or fraudulent return or claim; or (f) Fail, refuse or neglect to remit the to the city by the due date. 7.1012 Confidentiality. (1) Except as otherwise required by law, it shall be unlawful for the city, any officer, employee or agent to divulge, release or make known in any manner any financial information submitted or disclosed to the city under the terms of this chapter. Nothing in this section shall prohibit: (a) The disclosure of the names and addresses of any person who is operating a licensed establishment from which marijuana is sold or provided; or (b) The disclosure of general statistics in a form which would not reveal an individual seller’s financial information; or Ordinance Attachment 2 Exhibit A (c) Presentation of evidence to the court, or other tribunal having jurisdiction in the prosecution of any criminal or civil claim or an appeal from the Tax Collector for amount due the city under this chapter; or (d) Disclosure of information to and upon request of a local, state or federal law enforcement official or by order of any state or federal court; or (e) The disclosure of information when such disclosure of conditionally exempt information is ordered under public records law procedures. 7.1013 Audit of Books, Records or Persons. (1) The Tax Collector or other City official, for the purpose of determining the correctness of any tax return, or for the purpose of an estimate of taxes due, may examine or may cause to be examined by an agent or representative designated by the city for that purpose, any books, papers, records, or memoranda, including copies of seller’s state and federal income tax return, bearing upon the matter of the seller’s tax return. (2) All books, invoices, accounts and other records shall be made available within the city limits and be open at any time during regular business hours for examination by the director or an authorized agent of the director. (3) Refusal to voluntarily furnish any of the foregoing information when requested is deemed a violation of this code per section 7.1011. 7.1014 Forms and Regulations. (1) The Tax Collector is hereby authorized to prescribe forms and promulgate rules and regulations to aid in the making of returns, the ascertainment, assessment and collection of said medical marijuana tax and in particular and without limiting the general language of this chapter, to provide for: (a) A form of report on sales and purchases to be supplied to all marijuana retailers; (b) The records which marijuana retailers providing marijuana and marijuana items are to keep concerning the tax imposed by this chapter. Attachment 3 Attachment 3 Attachment 3 Attachment 3 Attachment 3 Attachment 3 Attachment 3 Attachment 3 Attachment 3 Attachment 3 Attachment 3 Attachment 3 Attachment 3 Attachment 3