For more than a decade, Californians seeking medical marijuana have been able to purchase it through dispensaries. Now, the state of California wants a cut of the action, and the medical marijuana community is not sure if that's a good thing or a bad thing.
In February, the state Board of Equalization sent a notice to medical marijuana retailers urging them to get a seller's permit like other retailers. "If you sell medical marijuana, your sales in California are generally subject to tax and you are required to hold a seller's permit," the notice said. It went on to warn sellers that "if you do not obtain a seller's permit or fail to report and pay the taxes due, you will be subject to interest and penalty charges."
Some club owners welcome taxation as part of the "normalization" of medical marijuana. But others worry that any tax information they submit could be used against them by federal drug enforcement agents.
"It's frustrating," Chris Moscone, an attorney for the San Francisco dispensary the Hemp Center, told the McLatchy Newspapers Monday. "There are basically two camps: Those that want to be treated like legitimate businesses, and the other side, where they're still rebels and don't want to be taxed."
It was a case involving the Hemp Center that led to the February letter from the Board of Equalization. As the board reviewed the Hemp Center case, it realized that while the dispensary was paying taxes on t-shirts, hats, pipes, and bongs, it was not paying taxes on the medical marijuana it sold. Upon review, the board determined that medical marijuana is subject to state sales tax because it is neither approved by the Food and Drug Administration nor supplied by a pharmacist.
To tax medical marijuana, the board had to update its guidelines. Under previous rules, sellers of illegal items could not get a seller's permit, but the dispensaries will be able to. The board will also allow dispensaries to sign a waiver instead of disclosing what they are selling, a move that could ease some concerns about federal authorities using tax records to persecute providers.
State officials estimate there are somewhere between 150 and 200 dispensaries. So far, only 27 have applied for and been issued seller's permits. But those numbers are likely to increase in the wake of the February letter.