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Medical Marijuana: California Begins Taxing Dispensaries

Submitted by Phillip Smith on (Issue #481)
Drug War Issues
Politics & Advocacy

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.

Permission to Reprint: This content is licensed under a modified Creative Commons Attribution license. Content of a purely educational nature in Drug War Chronicle appear courtesy of DRCNet Foundation, unless otherwise noted.


Anonymous (not verified)

Is anathema to "compassion", as in COMPASSIONATE Use Act. Taxing the ill on their medicine is obscene, unethical, and unacceptable.

Fri, 04/13/2007 - 1:59am Permalink
Anonymous (not verified)

Maybe it's time for them to be issued and legalize it.I believe it is $1/oz. for medical & $100/oz. if recreational.End the war on drugs,payback China & fire them-No More Imports;Then clear the deficite,re-fund social security,And with a little luck fund a national health care program within a couple of years.The right person could become our next president on that platform.

Fri, 04/13/2007 - 3:16am Permalink
Anonymous (not verified)

I agree with those who claim that applying a state sales tax should be seen as step to making cannibis like any other normal commodity. In addition, when the legislature calculates the potential income stream to the state treasury, they will be more likely to resist prohibitionists. After all, money talks! But I still share the concern of those who worry that sales receipts and records would provide a paper-trail for Federal goons to come after providers and consumers. I wonder if there is some way for the state to collect the tax without revealing names and addresses?

Fri, 04/13/2007 - 5:54pm Permalink
Anonymous (not verified)

I think that mmj should be grandfathered in under the rules as an "herbal supplement", for taxation purposes. (Technically, in California, it has the same status as Ginkgo biloba or valerian -- a doctor cannot prescribe it, but can recommend it. The only difference is that it is still a schedule I drug, but has a defense-to-prosecution on the state level in the form of the medical marijuana card program.)

Tue, 04/17/2007 - 5:29am Permalink
chance (not verified)

Part of being a medically qualified user in San Francisco is experiences with dispensaries predating the compassionate use act. Since the departure of Dennis Peron from the local MMJ scene, there's no one even remembering Dennis' vocal advocacy for bringing the price of an ounce of potent medicine down to the neighborhood of 30-40 bucks.

Part of being a medically qualified user in San Francisco is a litany of occasions finding oneself feeling profound disgustedness at the sight of growers and other principals in local dispensaries showing photos of their latest trips to Hawaii or Amsterdam or who-knows-where to dying patients... dying patients whose disability checks financed these globe-trotting adventures.

I imagine dispensaries serve a purpose for those who prize convenience, or for those who rely on baked goods or other specialized cannabis products and preparations (I get a craving myself for decent hashish a few times a year). But the prices are prohibitive for anyone who might be disabled and on a fixed income.

Sure, the cost of operating a storefront dispensary in one of the most expensive real estate markets in the world has to be passed on to the consumer, and I've seen prices actually drop since so many dispensaries have popped up... so perhaps this is one area where the application of "free market prerogatives" might actually not be the conservative boondoggle its been everywhere else it's lauded.

But the fact remains that medicine is already prohibitively expensive for medically fragile patients with limited resources. The great state of California's cut is doubtlessly also poised to be passed to the consumer, and it seems that I still remember the consumers were originally intended to be the primary beneficiaries of California's Proposition 215... or at least, that's what the campaign organizers told us.Perhaps that what we get for putting it on the ballot.

My solution: I obtain 99% of my medicine on the "black market," from friends with long standing associations with California growers who don't care to get locked into the kind of price fixing practiced among San Francisco dispensary operators. What it translates into is that I typically pay between half to two thirds of dispensary prices for product that hasn't been "kif'ed" or otherwise messed with. My friends know I need to watch my finances, and I don't mind supplementing theirs in return. It's called "cooperation," and commonly practiced among responsible adults who try to maintain ethical standards and mutual support.

Don't believe me? Well, why don't you ask the organizers of local public cannabis events why attendance has dwindled from hundreds to dozens. If one cares to look beneath the surface, I think most San Franciscans who must rely on medicinal cannabis are fed up with being financially exploited by dispensaries.

primum non nocere

Tue, 04/17/2007 - 3:37pm Permalink
Anonymous (not verified)

Fucking right on man... big AMEN to that. I just got back to Oregon from the Bay Area... everything you say is right on the dot. I can't believe how ridiculous the scene is down there!!! "Aw man, I only smoke purps.. that stuff you guys smoke up there is like grass." Give me a fucking break. Is that what it's come down to??? It seems that in places like Oakland, weed is like bling. Status symbol bullshit. Paying out the ass for purple nugs is not my idea of good medicine. Cali needs a reality check, hardcore. I used to complain about the lack of dispensaries here in Oregon, but I think we're better off without them. We're definitely moving more towards the cooperative side of things here.

Wed, 04/18/2007 - 10:54am Permalink

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