Pubdate: Tue, 18 Sep 2012
Source: Victoria Times-Colonist (CN BC)
Copyright: 2012 Times Colonist
Author: Les Leyne
Bookmark: (Smith, Ted)


Ted Smith is the happiest new taxpayer you can imagine. The longtime 
marijuana advocate was only too happy to go public recently with news 
that the Canada Revenue Agency has sent him a demand note for about 
$150,000 in back taxes.

That's based on just the last few months of operation of the 
long-running pot-buying club Smith runs for the benefit of people 
with various medical afflictions.

"In many ways this is a wonderful thing that's happened," he told 
reporters at a news conference. "Paying taxes - has been my dream 
since the beginning," he said.

Few recipients of demand notes from the tax collector talk like that. 
His enthusiasm obviously stems from the fact that paying taxes 
further legitimizes the club and is another step down the road toward 
decriminalizing marijuana.

And there's not much doubt that the finance arms of most governments 
would be as happy to tax Smith as he is to pay the taxes. Because the 
financial numbers he referred to - backed up by findings in an 
earlier court case - are startling.

The rundown little storefront on Johnson Street is doing a booming 
business. Smith estimated he's averaging $6,000 a day running it on 
what a judge earlier commented was a very casual basis.

If you wander around downtown looking at the retail landscape, you 
can count on one hand the number of small shops where they can boast 
that kind of cash flow. Smith told reporters the club brought in 
$250,000 in July.

Police have been sporadically busting the club's operations for 
years, but it doesn't seem to make much of a dent in the enterprise. 
A takedown of the club's bakery a few years ago resulted in the case 
where the glimpse of the financial picture was provided.

They knocked on an apartment door on View Street in 2009 and found a 
bachelor suite had been converted into a cannabis bakery. The baker 
worked directly for Smith and was paid between $10 and $13 an hour.

The eventual court decision by Justice Robert Johnston last spring 
noted: "Smith buys marijuana in pound quantities and pays employees, 
like the accused - to render between five and 10 per cent of the 
dried marijuana into other forms like cookies, oils, capsules and 
ointments. The bulk of the dried marijuana is packaged and sold 
through the store openly operated by the club in downtown Victoria."

The decision noted that Smith estimated the store - open seven days a 
week - generated revenue of $6,000 to $6,500 a day.

"Mr. Smith aims for a profit margin of between 20 per cent 25 per 
cent," said the decision.

Neither the club nor the store keep records and the society maintains 
only minimal records, said the judge.

So where the money goes is anyone's guess. Johnston's decision found 
that a non-profit society "is involved somehow," but "it appears that 
the club is a sole proprietorship wholly owned by Mr. Ted Smith."

Smith, who said he pulls down only about $24,000 a year from the 
store, said he will be rejigging the operation to turn it over to a society.

The key observation in the decision from last spring is that "neither 
the store nor the club collects or remits HST, nor does the business 
pay income taxes."

It looks as if the CRA can read court decisions just like everyone 
else. When the club's revenues came to light, it apparently sparked 
the demand for back taxes.

The bulk of the decision revolved around constitutional arguments 
over the difference between marijuana dried for smoking - the form 
stipulated under the current medical-marijuana regime - and pot 
processed into cookies and oils. The judge found the different 
treatment unconstitutional and gave the federal government a year to respond.

Whatever government lawyers make of cookies versus joints, it's clear 
the finance ministry has dollar signs in its eyes.

Imagine the provincial finance ministry, which just disclosed a 
billion-dollar hole in the books because of a natural-gas slump, 
learning of a multimillion-dollar business that is eager to start paying taxes.

It's just a taste of what's to come, eventually. Watch the municipal 
convention next week for another development, when the Union of B.C. 
Municipalities debates decriminalization. A resolution from Metchosin 
urges decriminalization, and research on the regulation and taxation 
of pot, and it's apparently going to be duly considered.
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MAP posted-by: Jay Bergstrom