Customers at Nevada City’s future medical cannabis dispensary could pay a 15 percent excise tax to the state on all purchases and could bear the burden of additional local and state taxes.

Nevada City’s council members approved a local tax structure for cannabis businesses Wednesday, Oct. 25, which will need further approval from voters.

The city proposes charging a 4 percent tax on gross receipts for dispensaries, a 2 percent tax on gross receipts for testing laboratories and a 2 percent tax on gross receipts for manufacturing, processing and distribution businesses.

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Growers will also be taxed by the state and the city, but Nevada City’s council members say they don’t expect many cultivation businesses to operate in city limits.

The state will charge growers $9.25 per ounce of cannabis flowers and $2.75 per ounce of leaves that enter the commercial market, according to the California Department of Tax and Fee Administration.

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The city proposes an additional tax of $4 annually per square foot of canopy space for growers using artificial lighting, $3 per square foot for growers using both natural and artificial lighting, $1 per square foot for only natural lighting and 50 cents per square foot for nurseries.

Jonathan Collier, with the Nevada County Cannabis Alliance, said taxes on cannabis down the supply chain could likely be passed on to consumers, which means a patient purchasing from Nevada City’s future medical dispensary could be paying a high price for medicine.

On top of a 15 percent state excise tax, a patient could bear the burden of taxes on growing, testing, processing and manufacturing, as well as the local dispensary tax.

“What we’re seeing from other states is that when you charge too much, it disincentivizes consumers to buy from dispensaries,” Collier said.

If consumers are able to purchase cannabis on the black market for far lower prices, he said, they are more likely to avoid purchasing from legal businesses. But, Collier said, Nevada City’s proposed taxes are reasonable compared to other municipalities around the state.

Many community members agreed during Wednesday night’s city council meeting, thanking city officials for proposing fair rates.

Council members opted to lower the proposed taxes for some businesses. The local rate for dispensaries was lowered to 4 percent from city staff’s initial proposal of 5 percent. The rate for manufacturing businesses was lowered to 2 percent from 3 percent.

If approved by voters, the proposed taxes would set a maximum rate the city could charge cannabis businesses. City officials could lower the rates at any time, but raising them would require another ballot initiative.

“I just don’t want to burden them,” said Council member Evans Phelps, who pushed for lower rates Wednesday. “I want this to be successful.”

Council member Reinette Senum agreed.

“I have never seen a business so overly regulated and taxed in my life,” she said. “I’m sorry it’s so regulated. To be honest, I think it’s a bit too much, but that’s the game you have to play. They don’t do that with beer and wine — or cough medicine.”

Collier thanked city staff and council members Wednesday for proposing reasonable rates.

“As we move into regulated industry, this is part of what comes from having legitimate businesses,” he said. “It’s no surprise. It’s something that will actually be welcomed as we move out of the shadows and into the light.”