San Rafael will expand its roster of medical cannabis business license categories from three to four when the program launches next month.

The City Council voted 5-0 this week to add two distribution business licenses to its existing types of medical cannabis businesses eligible to locate in San Rafael. Already in place are slots for eight business licenses for infused products manufacturing, four for delivery and four for laboratory testing.

Danielle O’Leary, San Rafael economic development director, said distribution is a key component of the local industry “ecosystem” because those delivery businesses collect the 15 percent state excise tax from the other local operations for submittal to the state. O’Leary said if San Rafael does not have a distribution operation in place, the other businesses would have to go elsewhere to process their state taxes.

“Tonight we just amended our pilot cannabis program to add two medical distribution licenses, so that we could create a more holistic local ecosystem,” O’Leary said Monday after the vote. Medical cannabis business owner Nurit Raphael said the distribution licenses will allow the “whole local ecosystem to make a full circle.”

Prior to the vote, Mayor Gary Phillips said he was concerned that adding distribution businesses might serve to make San Rafael “the medical marijuana hub of Marin.”

O’Leary said since other cities and towns in Marin have not yet set up their cannabis business licensing programs, it was hard to say how the county network would ultimately play out.

At the same time, O’Leary noted that cannabis distribution businesses, in addition to serving as the conduit for state excise taxes, could also generate additional revenue to the city because those distribution operations would be paying local city taxes.

If city voters on June 5 pass Measure G, a tax plan for cannabis business in San Rafael, distribution businesses would pay a 1 percent of gross receipts tax. Other taxes for the initial two years under Measure G include: infused products manufacturing, 3 percent; laboratory testing, 1 percent; and delivery, 4 percent.

The tax rates would be re-evaluated after two years, with a cap set at 8 percent of gross receipts.

The city is prohibiting licensing for retail cannabis dispensaries or cultivation businesses.

The business tax program could ultimately generate up to $1 million annually, officials said.

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