Los Angeles Voters Pass Medical Marijuana Tax

by Andres Chavez, San Fernando Valley Sun
March 10th, 2011

City of Los Angeles voters overwhelmingly passed Measure M to tax medical marijuana dispensaries. It would allow the city to collect $50 out of each $1,000 in "gross reimbursements" that dispensaries receive from their patients. That could generate $10 million a year, which the city can use to pay for basic services such police, libraries and street repairs, according to proponents.

Councilmember Paul Koretz, who campaigned for Measure M, said the measure would help the city narrow the gap in its budget.

"The city of Los Angeles is facing a $350 million budget deficit next year," he said. "Thankfully, because of Measure M, we are going to help close that gap and generate significant revenue for public safety, parks and libraries."

Just how significant a tax that generates less than three percent toward closing the budget deficit is open to question.

Kris Hermes, spokesman for Americans For Safe Access, the nation's largest medical marijuana advocacy group, said he was disappointed.

"We campaigned hard against this additional tax in Los Angeles, because patients already pay a nearly 10 percent (sales) tax on the medication that's already expensive and unaffordable for many," he told City News Service.

Hermes said an eighth of an ounce of medical marijuana typically costs $40 to $60, and certain high quality varieties are even more expensive.

Measure M raises many legal questions as City Council President Eric Garcetti pointed out.

"If marijuana is supposed to be medicine, you can't tax medicine. And if it is a gross receipts tax on a business, these (dispensaries) are not supposed to be businesses," he said.

"If this wound up in court and we lost, a year from now or two years from now, it could blow a hole in the budget when we have to return the money."

The City and county officials had other legal concerns as well.

Police Chief Charlie Beck, Sheriff Lee Baca and District Attorney Steve Cooley all opposed Measure M, pointing out that federal law bans the growing, possessing or consuming of marijuana for any purpose.

"The city should not place a tax on something our federal government considers a Schedule I narcotic and against the law," they said in a written statement.

Testifying before the L.A. City Council last year, principal tax compliance officer Larry Manocchio noted that collectives are classified as nonprofit organizations, and therefore cannot be taxed.

But "this is something we cannot say 'no to," argued Councilmember Janice Hahn, who initiated the ballot measure.

Hahn disputed the notion the city would be taxing "profits" from the sale of medical marijuana. She said the city would instead be taking a portion of what patients give dispensaries as "reimbursement" for the costs associated with cultivating weed, such as worker salaries, rent and utilities.

Several other California cities have already imposed this tax, Hahn said. San Jose and La Puente each charge $100 per $1,000 in gross reimbursements. It's $50 in Oakland and Richmond, $40 in Sacramento, and $25 in Berkeley. Long Beach is considering a $50 tax.

There are hundreds of collectives across Los Angeles, but only the nonprofit organizations whose members cultivate marijuana for medical purposes are considered legal.

Source: Americans for Safe Access

NEWS: Medical Marijuana Tax Opposed in Los Angeles

by Chelsea Hoffman

Measure M, a medical marijuana tax, will be decided upon by voters Tuesday. This measure will add a 5 percent tax increase on legal medical cannabis dispensaries. It may not seem like a big deal since activists are for the taxation and legalization of the plant, but there is a stipulation to this measure.

Los Angeles plans on limiting the availability of dispensaries to only 100, but the kicker to this is the ones that get to stay aren't chosen by any rhyme or reason. They will be chosen by lottery. This is outraging dispensary owners and activists throughout the city, some who have served patients of medical marijuana for years.

Dispensaries in Los Angeles, who already run as non-profit, already pay a slew of taxes, and many feel that this 5 percent increase along with the lottery is only going to make it more difficult for dispensaries to maintain. This could limit the availability of medical marijuana to patients who are in need.

Source: Gather Inc.

NEWS: Debating Measure M - it’s high time for LA voters to decide on taxing medical marijuana

If passed, Measure M would let the city take home $50 for every $1,000 in pot-shop sales. Sounds like a great way for a city facing a $319-million budget shortfall to generate some much-needed revenue, right? Not so fast, say opponents.

For one thing The Los Angeles City Attorney's office published a ruling that says that even if approved by voters, the measure is illegal because the dispensaries are nonprofits and selling marijuana is a crime.

There's the thorny issue of declaring something illegal and then taxing it. Both sides agree that in all likelihood dispensary operators will be happy to pay the tax for the legitimacy and stability it would seem to grant their businesses. Cynics suggest they also hope that the city's reliance on tax revenue from their businesses would make the police less inclined to raid their establishments and scrutinize their day to day dealings.

Would passage of this measure be perceived as a tacit endorsement for the legalization of marijuana? Would adding another 5 percent tax to the existing 9.75 percent county sales tax be an unfair burden to medical marijuana consumers? Does the projected $10 million in revenues this could raise make all other concerns go up in smoke?

Larry and his guests hash it out.

Source: Southern California Public Radio

EDITORIAL: No on Measure M - Medical Marijuana Sales Tax in Los Angeles

L.A.'s proposed tax on medical marijuana dispensaries would be an unfair and dangerous step.

Measure M is one of those voter initiatives that at first glance look a lot more straightforward than they really are. There are, after all, hundreds of medical marijuana dispensaries in Los Angeles — just look for the green crosses — that pay state sales tax but not city taxes. Measure M would make them pay their fair share and then some, by imposing a steep gross receipts tax. That sounds like a reasonable way to help the city avoid cuts in public services as it digs itself out of a budget hole. But it's a dangerous step.

State lawmakers and municipalities still haven't agreed on how to regulate a drug that the state considers medicinal and the federal government considers illegal, so cities are deciding for themselves. Several — including Oakland, Berkeley, Sacramento, San Jose and Long Beach — have already approved taxes similar to the one that would be imposed by Measure M. And yet the city attorney's office believes that Los Angeles "should not, and indeed legally cannot, allow and tax marijuana sales," and opines that passing Measure M "would be of little or no effect." How can that be?

At the heart of the question is whether or not medical marijuana dispensaries — or collectives, or cooperatives, or whatever they choose to call themselves — are for-profit operations. Back when Gov. Jerry Brown was California's attorney general, he issued an opinion that they can operate only as nonprofit cooperatives or collectives in which patients or their "primary caregivers" grow marijuana and supply other members. They can charge members for their cannabis, but only enough to cover their overhead costs. Yet Brown's opinion hasn't been tested in court, and there is no telling how many of California's storefront dispensaries are really operating as nonprofits. In December, the operators of a San Jose marijuana "collective" were charged with illegal sales and money laundering after police said they discovered two sets of books, one showing an operating loss and the other showing a profit of $222,238.

If marijuana collectives are genuinely nonprofits, they're exempt from city taxes. So why have Long Beach and other cities been able to tax them? Because to be considered tax-exempt charitable nonprofits, organizations have to register as such with the Internal Revenue Service, which is like sending a cable to the federal government to tell it you're distributing a product that Washington considers illegal. Very few, if any, medical marijuana facilities have done this, opting instead to pay local taxes.

Getting in bed with a quasi-legal industry has drawbacks. If city government became reliant on tax revenue from medical marijuana sellers, city officials would be less likely to pass ordinances restricting their operations and police would be less inclined to raid their establishments to check whether they're really running on a nonprofit basis. A decrease in such scrutiny would encourage more illegal for-profit dispensaries, which draw other kinds of crime. Prices for a drug that many people use to relieve suffering (even if others use it to get high) would rise, which is why legitimate patient advocates such as Americans for Safe Access oppose taxation measures.

We agree with Brown that medical marijuana should only be distributed by nonprofit cooperatives or collectives. If they're truly operating that way, it's unfair for the city to tax them, and if they aren't, they should be shut down rather than taxed. That's why we urge a no vote on Measure M.

Source: Los Angeles Times

NEWS: Proposed cannabis tax sparks a heated debate

Voters will face a familiar, burning issue on the March 8 city ballot: Marijuana.

In contrast with last November's failed California proposition to legalize recreational pot use, Los Angeles' more complicated Measure M asks if the city should impose a hefty tax on medical-marijuana dispensaries.

Proponents say requiring dispensary operators to "pay their fair share" - in this case, 5percent of gross receipts - could raise $10million a year for the city's deficit-plagued general fund.

Opponents claim the proposal won't fly because medicine and the nonprofit organizations that dispense it cannot be taxed, and they worry that if the city makes revenue from dispensaries, it will be encouraged to allow more of them.

While the two sides debate the details, voters may be guided more by their general attitudes, such as their overall feelings about marijuana, said Jessica Levinson, who analyzes ballot initiatives for the L.A.-based Center for Governmental Studies.

"It really comes down to what's important to voters," Levinson said. "If they think, `Yes, this is a measure that has problems, but people use medical marijuana and the city needs money,' then I think they would vote yes.

"If voters say, `Morally, we're against the sale of marijuana no matter what the use is,' or if they're for medical marijuana but think the current system is being abused, then they would vote no."

Measure M was placed on the ballot by the City Council, which is trying to climb out of a $350 million budget hole in the next fiscal year.

It comes as the smoke clears from last November's marijuana initiative battles.

California's Proposition 19 would have legalized - and taxed - up to one ounce of marijuana for recreational use by adults. The initiative lost 53.5-46.5 percent. Its backers are talking about trying again in 2012.

At the same time last year, voters in nine California cities - including Sacramento, Oakland and San Jose - approved medical-marijuana taxes similar to what Los Angeles is considering.

Signatures on the official "Yes on M" argument include those of City Council members Janice Hahn and Paul Koretz, and Pat McOsker, president of the United Firefighters of Los Angeles City, Local 112.

"The city needs revenue. I know that as well as anyone," said McOsker, who says the Los Angeles Fire Department budget has shrunk to $495 million from $560 million two years ago, reducing the number of emergency responders by 156.

McOsker said United Firefighters' endorsement of Measure M doesn't mean it necessarily endorses medical-marijuana cooperatives, let alone recreational pot smoking.

"The voters of California decided (in 1996) that cooperatives are legal. What we're saying is they should pay their fair share (of taxes)," McOsker said.

The official "No on M" argument is signed by LAPD Chief Charlie Beck, Sheriff Lee Baca, District Attorney Steve Cooley and Council members Jan Perry and Bernard Parks.

"I think what we do (if Measure M passes) is we legitimize something that is against the law," Beck said in an interview. "Right now the law says we allow it to be dispensed because it's a medicine. We don't tax medicine. ... Let's be consistent."

Beck added: "These (dispensaries) are not good for your neighborhoods. If they become seen as a cash cow to (city officials) that are desperate, they're going to want more of them."

Measure M's opponents include the Oakland-based medical-marijuana advocacy group Americans for Safe Access, which contends a tax could make medical pot costlier for patients.

Source: Contra Costa Times