Los Angeles Voters Pass Medical Marijuana Tax

March 09, 2011

Andres Chavez, San Fernando Valley Sun

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.

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