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MEDICAL MARIJUANA DEEMED TAXABLE BY CITY OF PRESCOTT

PRESCOTT - Despite concerns that the move might be premature, the Prescott City Council approved a measure this week clarifying that medical marijuana is a taxable item.

During council discussions Tuesday about adoption of the 2011 amendments to the Model City Tax Code, much of the focus was on medical marijuana.

While Arizona voters approved a medical marijuana initiative in November 2010, the results of the initiative have since become mired in litigation at the state level.

That uncertain status caused some debate among the council members about whether the city should take action on the taxing issue at this point.

"Why are we passing a model tax code model when the state hasn't clarified it yet?" Councilman Steve Blair asked.

And Councilman Jim Lamerson questioned why the city would opt to tax medical marijuana at all.  "I don't like taxing things that are intended to help people," he said.

But Assistant Finance Director Matt Dunbar explained that the addition of a definition for medical marijuana simply mirrors the state's stand on the taxability of the product.

By including it in the code, Dunbar said, the city is clarifying that medical marijuana is a retail item and therefore taxable.

In fact, he said the sale of marijuana was always considered a retail function, even though he allowed that no marijuana sellers are currently paying sales tax.

By adding the definition to the tax code, Dunbar said the city is also clarifying that medical marijuana would not have tax exemptions similar to those granted to prescriptions drugs.

"What this does is, even if it is under the recommendation of a physician, it is still considered retail sales," Dunbar said.

Because medical marijuana would be a "recommendation" of a physician, and not a prescription, Dunbar said, "Basically, it's saying ( medical marijuana ) is not going to meet any of the exemptions."

City Councilman Len Scamardo, a long-time member of the Prescott Planning and Zoning Commission, pointed out that the commission earlier considered a number of zoning-related issues regarding medical marijuana.

"We decided not to get into the morality issue," he said of the marijuana issues.  "The voters voted it in."

The council voted 5-2 to approve the amendments to the Model City Tax Code, with Lamerson and Blair voting against the motion.