San Diego, CA – Real Estate & Cannabis Regulations (City & County)

Uses: The city allows the following adult-use and medical commercial cannabis uses:
Cannabis Production Facilities (CPFs): these facilities may include operations involving agricultural raising, harvesting, processing, storage, and wholesale distribution of cannabis products.

Cannabis Outlets (COs): Establishments (retail, medicinal or combination) operating with a Conditional Use Permit where cannabis, cannabis products and cannabis accessories are sold to the public. Delivery is also allowed from these establishments.

Testing Facilities: Testing for scientific research (including cannabis testing) that leads to the development of new product and processes is allowed as an Industrial Use.

Distance Requirement: Must be located: 1,000 feet from resource- or population-based city parks, other outlets, churches, childcare centers, playgrounds, libraries, minor-oriented facilities, residential care facilities and schools; and 100 feet from residential zones.

Cap of Business: 40 Cannabis Production Facilities (CBFs) citywide and 4 Cannabis Outlets (COs) in each of the city’s 9 council districts.

Tax Rate: Effective January 1, 2018, the Cannabis Business Tax rate was 5%. On July 1, 2019, the rate increased to 8%.

Two types of sales qualify as medical marijuana activities excluded from the Cannabis Business Tax: (1) Nonprofit cannabis businesses that make only medical cannabis sales can exclude gross receipts from sales made to patients with a doctor’s recommendation or a state issued Medical Marijuana Identification Card and (2) Nonprofit and for-profit cannabis businesses with both medical and recreational cannabis sales can exclude gross receipts from medical cannabis sales only when made to patients with a state issued Medical Marijuana Identification Card.

The County of San Diego is the fifth largest county in the United States and second largest in California with a population of approximately 3.4 million. This county is comprised of 18 incorporated cities, half of which have legalized commercial cannabis including: San Diego City, Chula Vista, Imperial Beach, La Mesa, Lemon Grove, National City, Oceanside, Vista and Encinitas where Measure H recently passed in November of 2020. Each of these incorporated cities have their own rules for how they regulate commercial cannabis in their cities.

The County of San Diego also includes a massive area of additional unincorporated territory including large communities like Fallbrook, Bonsall, Julian, Alpine, Otay, and Borrego Springs.

These unincorporated areas fall under the county’s jurisdiction for their cannabis regulations and have had little to no access to legal cannabis in the past. Currently only five medical marijuana dispensaries are allowed to operate in the city. As the county looks to end it’s moratorium on cannabis businesses, San Diego County is poised to be a massive new market in the cannabis industry.

Uses (Pending): Indoor Cultivation, Retail, Delivery, Manufacturing, Testing, and Distribution

Distance Requirement (Pending): Commercial Cannabis Activity has to be located at a minimum distance of 600 feet from sensitive uses: School k-12, youth center, and day care centers.

Cap of Business (Pending): TBD

Tax Rate: TBD

Other Incorporated Cities in San Diego County

Chula Vista

Measure Q passed in November of 2018, allowing adult-use licensed cannabis in Chula Vista, including cultivation, manufacturing, distribution, retail and testing. There are a total of 12 retail licenses available with a limit of three per district. By year-end 2020, only one retail license has been issued for a non-storefront delivery service which began operating in November of last year. There are multiple lawsuits pending against the City claiming the application process was arbitrary and biased in nature. Chula Vista’s retail cannabis business tax is currently 7%.

Encinitas

Measure H, which allows for adult-use cultivation, manufacturing, distribution and retail sales, was passed by Encinitas voters on November 3, 2020. When available, there will be a limit of four retail licenses, which can be increased by the City Council at their discretion. Applications for cannabis licenses could be accepted by Encinitas as early as Q3 2021. There is no local cannabis business tax on retail sales other than standard sales tax. 

Imperial Beach

In July of 2018, the Imperial Beach City Council approved an ordinance to allow one adult-use retail license. At least 12 months after the first dispensary opens, the City Council may vote to allow one additional license. Imperial Beach has no local cannabis business tax and has yet to issue its first commercial license.

La Mesa

The City of La Mesa allows both medical and adult-use licenses for retail sales, cultivation, manufacturing, distribution and testing. Multiple licenses have been issued, and there are currently five dispensaries operating in the city. The local cannabis business tax rate in La Mesa is 4%. 

Lemon Grove

Licensed cannabis in Lemon Grove is currently limited to medical dispensaries only, though the City Council is expected to adopt adult-use regulations in 2021. One medical dispensary is operating in La Mesa with multiple applications in process for the three remaining licenses that are available. On November 3, 2020 Lemon Grove voters approved Measure J, to establish a commercial cannabis business tax of up to 8% for retail sales and up to 4% for all other marijuana businesses. On December 15, 2020, La Mesa’s City Council decided on an initial tax rate of 5%, which went into effect on January 1, 2021. 

National City

Currently, all commercial cannabis activity is prohibited in National City. However, on September 17, 2019, City Council voted to develop an ordinance allowing for three cannabis businesses in National City, then voted again on February 18, 2020, to allow a maximum of six cannabis businesses that can include consumption lounges and a 5% community benefits tax rate for these businesses. If passed in a timely manner, National City would become the first jurisdiction in San Diego County to allow for on-site cannabis consumption. The Covid-19 pandemic has stalled progress on this issue, leaving local healthcare and community activists as well as the cannabis industry waiting for the adoption of the ordinance. 

Oceanside

On April 11, 2018, the City of Oceanside approved medical cannabis. Updates to the original ordinance include the addition of adult-use cultivation in June of 2020 and the passage of ballot Measure M, establishing a cannabis business tax on November 3, 2020. To date, Oceanside has issued 10 medical cultivation licenses, two nursery licenses, for manufacturing licenses and three for distribution as well as two non-storefront retail (delivery only) licenses. To date, one retail business is operating in Oceanside, and the cannabis business tax for retailers is 5%, which went into effect on January 1, 2021. 

Vista

Commercial cannabis was adopted in Vista on November 6, 2018, when residents voted in favor of ballot Measure Z, which allowed up to 11 medical cannabis retailers. On December 10, 2019, City Council voted to expand commercial cannabis licensing to include manufacturing, distribution and testing laboratories with a limit of two manufacturing and two distribution licenses. There is no limit on cannabis testing laboratory licenses. There are multiple medical retailers open in Vista, and the current medical retail tax is 7%.