Kane County may implement lower pot sales tax to attract more businesses

In a bid to make Kane County more attractive to recreational marijuana businesses than its rivals, the county board's finance committee voted Wednesday to tax municipal cannabis sales at less than the maximum allowed.

Committee members voted 4-3 in favor of a 2.5% sales tax, less than the 3% maximum the committee initially favored until it was persuaded by county board members Matt Hanson and Jarett Sanchez to lower the rate.

There is still much for the county to resolve before any businesses can set up shop, but it is one of many layers of local government trying to prepare for legal recreational marijuana sales that can start Jan. 1. Getting a piece of any new tax dollars is among the issues.

State law allows counties to create two sales taxes on recreational marijuana - one for sales in unincorporated areas directly overseen by the county, the other on sales in municipalities within the county's borders.

Kane County has not yet addressed whether it will allow recreational sales in unincorporated areas. With local cities and villages already debating and voting on allowing recreational sales, Kane County officials prioritized discussion on a potential municipal tax.

Just last week, a different Kane County Board committee pushed the idea of taxing municipalities at the maximum rate of 3%.

In urging the finance committee to set the lower rate Wednesday, Hanson, a Democrat from Aurora, said he expects Aurora could get as many as four dispensaries. But because the city sits within four counties - DuPage, Kane, Kendall and Will - recreational marijuana businesses will set up shop in the part of Aurora that features the lowest tax burden on their establishments.

"I would like to think we are encouraging people to set up camp in Kane County, rather than 500 feet away in another county," Hanson said. "If we tax at 3%, and they go somewhere else, 3% of zero is still zero."

Finance committee Chairman John Hoscheit said he believes the county should impose some sort of tax.

"It's not going to be money that falls out of the sky," he said. "I think we'll have to give a significant portion of it to public safety to deal with the ramifications."

He was swayed by Hanson's argument about being competitive. Neighboring McHenry and DuPage counties have both recently debated 3% taxes on municipalities. And Kane County would have the option to raise its tax, in quarter-point increments, sometime down the line, he said.

Hoscheit was the tiebreaking vote to send it on for more consideration by the county board's executive committee. That committee could modify the tax amount or send it to the full board for a final vote next month.

Board member Cliff Surges said he hopes the county board picks a tax rate - he favors 3% - and sticks to it for the long term.

"As a business owner, I can tell you the thing most business owners are looking for from their towns and local governments is predictability and consistency," Surges said. "To change it later, I don't think that's a healthy or fair business model for us."

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