Silhouette of the marijuana plant at sunrise. [Image from CanStockPhoto]
Please Note: The reporter for this play was previously an employee of Attorney Ed Denson, one of the attorneys representing the licensed cannabis growers in this suit.
Cannabis growers have been on the edge of their straw bales for nearly four years, turning their green fingers as they wait patiently for the final decision in Humboldt County’s amendments to the Action S lawsuit. Good news for farmers: On March 11, 2021, the California First District Court of Appeals ruled in their favor on all issues.
The preliminary opinion issued at the end of February was confirmed. It says: “A group of challengers, including the interviewed Karen Silva, has sued [Humboldt] County to repeal the changes, and the court agreed that the changes had unduly expanded the scope of the tax. “
In November 2016, 64.5% of Humboldt County’s voters supported the Measure S excise tax on cannabis growing at $ 1 per square foot outdoors, $ 2 per square foot in mixed light, and $ 3 per square foot indoors the County General Fund.
The Board of Supervisors approved Humboldt County’s amendments to Measure S on June 6, 2017, and again on April 3, 2018, which considered plaintiff’s attorneys, Eugene Denson and Fred Fletcher, later joined by appeal attorney Jay Moller, as essential “Illegal” because these changes required voter approval.
Voters, taxpayers, and the county’s marijuana advocacy groups have partnered with farmers – some are pending approval – to sue the county for paying cultivation taxes that they claimed were not based on the original text of the Measure owed.
In the case of interviewee Karen Silva, she paid $ 40,000 for permission to grow in 2017, despite not having grown that year. Silva is not alone, there are several permit holders who did not cultivate but still paid the tax.
The county claimed the tax was on the permit for “the right to do business”. [Listen to former Humboldt County Counsel Jeff Blanck at minute marker 1:10 Kmud News Story] not on the cultivation itself. Then the county taxed farmers for having a permit based on the square foot of the acreage instead of the individual plant canopies. The county also billed landowners instead of permit holders.
The three questions raised in the appeal are:
… Whether the changes have inadmissibly expanded the scope of the tax by
[1.] Extending the reach of farmers to owners, …
[2.] by expanding taxable property from actually “cultivated” areas to all areas “approved” for cultivation, …
[and 3.] Whether the changes have widened the scope of the tax by changing the point at which taxes begin to run.
The district’s argument was: “The Board’s changes did not improperly amend Measure S, they merely clarified some of the ambiguous provisions of the measure.”
The court disagreed.
The county said it was necessary to change the wording of the measure in order to “allow efficient management of the tax and prevent fraud by farmers who do not declare the area of their cultivation”. They added that “such a fraud would be difficult to prevent in a sprawling, rural and wooded district like Humboldt”.
However, Judge Neel said the county’s allegations were “unsupported”.
The District of Humboldt was the first to put forward procedural arguments on appeal on issues such as permanent and comprehensive remedies, but the court found none to be convincing. (The court had previously ruled in two other questions in favor of the county whether taxes were owed every two years v. Every two years in addition to requiring federal compliance to owe the tax. Plaintiffs did not contest these matters. )
The court ruled in favor of Silva et al. say in all matters:
… The amendments have unduly expanded the scope of the tax by extending its application from growers to all owners who are subject to a cultivation permit, extending the taxable areas from the cultivation areas to the entire area covered by the permit, and extending its application to persons who have received a permit but may not have started growing marijuana under that permit.
What does this decision mean for licensed cannabis growers? Will they get back their taxes that they did not owe based on the original wording of Measure S? Should farmers hurry to calculate the area of the walkways and canopies of the companion plants?
The introduction of possible refunds and the exact implications of this decision have yet to be determined. The county can still attempt to defeat Judge Kelly L. Neel’s decision by asking the appeals court to take a second look and / or by appealing to the California Supreme Court. You have 40 days to act and if you don’t the decision is final.
Attorney Eugene Denson went on to explain what to expect: “If the county appeals to the California Supreme Court, it may take months for the court to accept or reject the appeal. So we still don’t know if the new decision is the final decision or if the county will voluntarily refund the illegally collected taxes when they finally exhaust their remedies. “
However, appeals attorney Jay Moller appears optimistic, commenting on the decision as follows: “It’s official. WE WON. This was an almost frivolous appeal … there’s no way I can overturn this bulletproof appeal decision with a retry motion, a petition for review in the CSC, or an application for certification in the USSC … Ed and Fred did a good job, and Judge Neel has a motion made admirable decision. The county should be ashamed of wasting so much money on this lawsuit. “
Note: With regard to the original petitioners / plaintiffs – HUMMAP, the Humboldt Cannabis Taxpayers ‘Association and the Humboldt Voters’ Association – all three associations later decided, without prejudice to the dismissal of the lawsuit.
Earlier: The judge decides on lawsuit S, the Humboldt County Cannabis Tax
