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Marijuana tax to be decided by L.A. voters

March 7, 2011

Marijuana continues to be a burning issue for Californians.

Voters across the state last November rejected Proposition 19, which would have legalized, and taxed, recreational use of the wacky weed.

But medical marijuana is OK in the state and some jurisdictions tax those operations.

Now Los Angelinos will decide if their city will join the medical marijuana tax trend.

Marijuana plant photo by Yarygin via iStock Photo by Yarygin via iStock

Measure M is on tomorrow's (March 8) Los Angeles ballot. If approved, it would give the city the ability to collect 5 percent of gross receipts from medical marijuana dispensaries.

Proponents of the tax say it's a good fiscal solution. The pot tax is projected to raise as much as $10 million a year for the city's general fund.

Several Pat McOsker, president of the United Firefighters of Los Angeles City, Local 112, said his group supports the proposal because "the city needs revenue. I know that as well as anyone. The voters of California decided (in 1996) that cooperatives are legal. What we're saying is they should pay their fair share (of taxes)."

Opponents say the proposal is a sin tax, and that's not an appropriate levy for a medical treatment. "The city has done nothing for the patients, and I don't see why the patients have to pay a sin tax," dispensary operator Yamileth Bolanos told the Los Angeles Times. "We're not a topless bar."

Plus, anti-tax advocates say the L.A. proposed medical marijuana tax is is unfairly large. They point out that it's is 10 times more than the city's highest tax and 40 times as much as tobacco sellers and pharmacies pay.

An illegal tax on an illegal substance? Then there's the issue of whether the tax itself is legal. Although 10 other cities in the Golden State tax medical marijuana, opponents of the L.A.'s Measure M say the tax won't work there because medicine and the nonprofit organizations that provide treatments are tax-exempt.

So how are other cities and the state itself collecting taxes from the dispensaries?

The California Board of Equalization has determined that medical marijuana is not exempt from sales tax like other prescribed medicine because state tax code doesn’t have a specific exemption for the marijuana. Also, some dispensaries reportedly have forgone tax-exempt status because of the compliance hassles.

The issue of taxing nonprofit groups was raised by none other than the Los Angeles City Attorney Carmen Trutanich in a report to the city council last fall. He told the governing board:

"We have previously advised that the City should not, and indeed legally cannot, allow and tax marijuana sales. Moreover, medical marijuana collectives in the City are required to operate on a not for profit basis. As discussed below, the collectives operating under the City's ordinance would be exempt from a business tax, or fee measured by gross receipts or income. Therefore, the proposed measure would be of little or no effect."

The city council accepted Trutanich's report, but decided the matter should be settled by Los Angeles voters. So they get the chance tomorrow.

Regardless of what the City of Angels electorate decides, you can be sure that it won't be the end of the debate over medical marijuana and taxes.

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