Medical Marijuana dispensaries –
originally allowed so sick patients could have safe access to the drug
– have become cash cows for cities that see the opportunity for an
alternative source of income.
originally allowed so sick patients could have safe access to the drug
– have become cash cows for cities that see the opportunity for an
alternative source of income.
"There’s no question there’s a big pot of tax money sitting
there to be collected," said Palm Springs lawyer Joseph Rhea, who
represents dispensaries.
Some cities have generated millions in extra revenue by placing
additional taxes on the businesses – Oakland brought in $1.4 million
in 2011 and San Jose $3.6 million during fiscal year
2011-12.
Palm Springs – the only Coachella Valley City to permit dispensaries
– collected $22,224 in sales tax over the course of a year, but does
not levy an extra tax.
It may be just a matter of time,
though.
though.
Mayor Steve Pougnet said the city is "taking a look at the
possibility."
"It’s something that we’ve definitely discussed," he
said.
Pougnet and Councilwoman Ginny Foat are researching what other cities
such as San Jose have implemented for possible discussion with the
entire City Council at a later date.
"Once we have that research, we will talk to our dispensaries here,
our stakeholders," he said.
An extra tax would have to be approved by voters.
Like any other business that has an exchange of goods, a sales tax is
collectable from marijuana sold at dispensaries and delivery services,
regardless of whether they are considered legal or not.
The California Board of Equalization collects between $58 million to
$105 million in sales taxes from dispensaries annually, based on
estimates of between $700 million and $1.3 billion in total
sales.
The board does not have actual numbers for sales of medical marijuana
because dispensaries are not required to identify their business type
when registering for a permit and can report total taxable sales
without categorizing the specific product sold.
Of the sales tax collected, 1 percent is returned to
cities.
In Palm Springs, the city
collects an additional 1 percent for Measure J on top of that – to
help pay for redevelopment.
collects an additional 1 percent for Measure J on top of that – to
help pay for redevelopment.
Palm Springs has seen a steady
increase in sales tax revenue over the years, but Palm Springs City
Attorney Doug Holland said he can’t attribute it to dispensaries,
which at one point topped at about a dozen.
increase in sales tax revenue over the years, but Palm Springs City
Attorney Doug Holland said he can’t attribute it to dispensaries,
which at one point topped at about a dozen.
"I think the amount they would be generating would be so small
it’s not a significant amount at this juncture."
Local dispensaries battling to stay open said they would welcome an
extra tax, if it meant no hassle from the city.
"We’d be OK with whatever payment plan, permit fee, in order to
stay open and serve our patients," said Charles Pace, director of
operations at PS Organica on East Sunny Dunes Road.
Many of the non-permitted dispensaries have been embroiled in legal
issues as they fight to stay open amid pressure from the city to
close.
Since early December, when the city issued abatement notices with
steep fines to all the illegal marijuana dispensaries operating in the
city, at least four of the nine have closed, Holland
said.
With the potential for extra revenue at a time when many cities are
struggling financially, marijuana advocates wonder why more cities
aren’t allowing the dispensaries.
"They’re denying a huge income into a city," Pace
said.
Despite a ban on dispensaries in most cities, there are still dozens
of them operating across the valley, and they are still required to
collect taxes.
Kris Hermes, spokesman for Americans for Safe Access, whose
organization’s goal is to advance medical marijuana policy at all
levels of government, said it’s the city’s right to levy extra
taxes on dispensaries, but doesn’t condone it. "We think it puts
an undue burden on the patients," he said.
In addition to the state sales tax, San Jose levies a 7 percent tax
and Oakland tacks on a 5 percent tax. Instead of an extra sales tax,
San Francisco receives additional revenue from dispensaries through
the licensing or permitting process.
"You’ll find in many cities, they tax medical marijuana far in
excess of other businesses. They feel that’s acceptable. Whether it
is or not, it does represent or indicate an alternative source of
revenue," Hermes said.
With only three permitted
dispensaries in the Coachella Valley, Rhea is guessing those
operations do well with sales.
dispensaries in the Coachella Valley, Rhea is guessing those
operations do well with sales.
"If they’re not bringing in a lot, something is wrong. They have
three collectives that are wide open, fully permitted in a tourist
town. There is going to be a substantial amount. If not, then
something is weird," Rhea said.
Cities could further add to their pocketbooks, advocates say, if
marijuana was legal like alcohol as it is now in Colorado and
Washington.
Even those cities that ban dispensaries could see a benefit if they
allowed the collectives to operate legally, said Ellen Komp, deputy
director of NORML of California.
"First of all you have a legal income stream, so that means you’re
paying employees that are paying income tax, and there’s payroll
tax," she said.
She also points to the savings in
law enforcement costs from not having to chase after non-permitted
operations and illegal purchasers. "There have been studies that
show when they close down dispensaries, crime increases on the street
because it goes back on the street. It increases crime and it
decreases the economic benefits to the community," she
said.
law enforcement costs from not having to chase after non-permitted
operations and illegal purchasers. "There have been studies that
show when they close down dispensaries, crime increases on the street
because it goes back on the street. It increases crime and it
decreases the economic benefits to the community," she
said.
According to a Colorado Center on Law and Policy Center study on the
legalization of marijuana, it is estimated that $32 million in new
revenue for the state and more than $14 million in new revenue for
local governments could be generated while saving more than $12
million in state and local law enforcement spending.
In California, a report conducted by NORML updated in 2009 estimates
total legalization of marijuana could yield at least $1.2 billion in
tax revenue as it lowers enforcement costs.
