Pubdate: Fri, 25 Feb 2011
Source: Press Democrat, The (Santa Rosa, CA)
Copyright: 2011 The Press Democrat
Author: Glenda Anderson
Bookmark: (Cannabis - California)
Bookmark: (Cannabis - Medicinal)


The state Board of Equalization wants to make it perfectly clear: Pay 
sales taxes on marijuana or risk prosecution.

"The sale of medical marijuana is not exempt from sales tax," said 
board Chairman Jerome E. Horton. Nor do illegal sales exempt people 
from paying taxes, he said.

That's not new, but the board has launched a new effort to clarify 
regulations, both for its own employees and medical pot distributors.

The clarification, combined with a crackdown on dispensaries that 
have not been paying sales taxes, could reap billions of dollars for 
the state, Horton said.

This week, the board ruled Berkeley Patients Group Inc. owes $6.4 
million for failing to pay sales tax on marijuana sales between 2004 and 2007.

The group had claimed its marijuana was not taxable because it is 
medicine, but there is no such tax exemption, Horton said.

The tax problem was uncovered through an audit triggered when staff 
noted the dispensary reported more than $2 million a year in revenue 
but claimed most of it was exempt, he said.

It's not known how many other pot dispensaries fail to collect sales 
taxes because the Board of Equalization does not have a code for 
marijuana sales and there has been a widespread culture of "don't 
ask, don't tell" among its staff members, an issue raised during the 
Berkeley case.

"To my surprise, we have no idea" how much tax money the state gets 
from medical marijuana sales nor how much it could be losing in 
revenue, Horton said.

Some staff members reportedly discouraged medical marijuana sellers 
from applying for a state permit because they believed marijuana 
sales are illegal, he said. The board has clarified the issue for 
staff, Horton said.

Dispensaries that have not been paying sales tax could soon find 
themselves in the same situation as the Berkeley cooperative.

Board of Equalization offices in Southern California have begun 
comparing city and county medical marijuana dispensary permits with 
state permits to see who is paying and who is not, Horton said.

He expects similar audits will be undertaken statewide.

That won't be a problem for most legitimate medical marijuana 
dispensaries, said Dale Gieringer, state coordinator for the National 
Organization for the Reform of Marijuana Laws.

Before 2007, many growers were unsure whether they needed to pay 
sales tax, but it has since been clarified, he said.

"We pay about $120,000 a year in sales tax," said Jim Hill, president 
of a 3,500-member cooperative. Its marijuana is grown in Mendocino 
County but most of its members are in Southern California, he said.

The cooperative also pays about $14,000 a month in payroll taxes, he said.

Matt Cohen, who manages another Mendocino County cooperative, 
estimated he pays more than $100,000 a year in sales taxes. It 
distributes marijuana to about 1,000 members in nine Bay Area counties.

"We incorporated in '09 and we've been paying it the whole time," he said.
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