Pubdate: Tue, 11 Sep 2012 Source: San Jose Mercury News (CA) Copyright: 2012 San Jose Mercury News Contact: http://www.mercurynews.com/ Details: http://www.mapinc.org/media/390 Author: Tracy Seipel POT CLUBS THAT SKIRT CITY TAX LAWS TARGETED Ordinance Would Shut Down Shops That Don't Pay All City Taxes SAN JOSE - In an effort to crack down on San Jose businesses - particularly medical marijuana shops - that skirt city tax laws, three City Council members are proposing an ordinance that would shut them down for not paying local taxes. Council members Sam Liccardo, Rose Herrera and Pierluigi Oliverio cited "millions" in business taxes not being paid in the past year alone by marijuana clubs as required under Measure U. That law, passed by 78 percent of voters in the fall of 2010, allows the city to tax marijuana collectives up to 10 percent of their total sales, though the council later adjusted that to a maximum of 7 percent. "Although many marijuana dispensaries are law- abiding, several dozen are saying, ' We're open for business, but we don't have any taxable revenue,' " said Liccardo. "That sounds a lot like, ' I smoked, but I didn't inhale,' and we need to clamp down on those businesses that aren't paying their fair share." A council committee will hear the proposal Wednesday to determine whether it should be put on the council's agenda. The council trio want their colleagues to address the issue at an October meeting when they're expected to decide their top priorities through the fiscal year that ends June 2013. Their proposal offers two options: amend a section of the Municipal Code to give the city the ability to shut down noncompliant marijuana dispensaries and revoke their licenses, or consider enacting a broader ordinance that empowers the city manager to shut down any business - marijuana-related or not - for nonpayment of taxes and fees. David Hodges, who founded the All American Cannabis Club, said the council memo is directed at someone like him, who refuses to pay city business taxes on the grounds that the medical marijuana collective is a not-for-profi t business. Instead, he said, its 4,000 cooperative members either grow the marijuana, work there, or contribute money to the club to defray its operating costs. "Our activities don't fall within taxable parameters," said Hodges, who noted that the city contends he owes them about $ 250,000 in business taxes since 2010. But City Attorney Rick Doyle said he won't accept Hodges' explanation until the city performs its own audit of Hodges' club. "Iabsolutely understand the concern that you have a tax in place, and not everybody is paying it," said Doyle. "Everyone should pay their fair share." But, he added, the council needs to ensure that proper staffi ng and resources - both of which havebeen severely cut back over the years because of budget woes- are in place to "get serious" about improving enforcement, from tax collection to nuisance abatement. The city is expecting a $ 22.5 million budget shortfall in fiscal year 2013- 14. In their two-page memo, Liccardo, Herrera and Oliverio said that the city collected more than $ 3.5 million in marijuana business tax during the fi scal year ending June 30. However, they say, millions more were not paid. According to the Department of Finance, 80 of the city's 158 collectives paid either no tax or paid only sporadically. Of those 80, 45 still operate. They also cited a hotel on South First Street that they said has been a "magnet of prostitution for several months, providing headaches to nearby residents." The same hotel, the council members said, failed to pay any Transient Occupancy Tax for years and owed the city hundreds of thousands of dollars, yet the city had no authority to take action to revoke the hotel's business license for nonpayment of taxes. Rather, they said, the attorneys have become embroiled in time- consuming litigation over nuisance issues, which require extensive court hearings. An ordinance, they said, could help shut down businesses that constitute nuisances and ignore their tax payments. - --- MAP posted-by: Matt