Medicinal marijuana puts tax collectors in tight spot

In a tight budget year, California wants every tax dollar it can lay its hands on. This year, those hands are reaching for marijuana.
More than a decade ago, California voters approved the use of marijuana for medical purposes, making it legal under state law. However, federal law enforcers say marijuana use of any kind is illegal - and they are raiding clinics to prove their point. The state tax appeals board, which wants the sales taxes, is stuck in the middle.

"We're caught between a rock and a hard place," said Betty Yee, a member of the state Board of Equalization, which collects and distributes sales taxes on more than $553 billion worth of transactions each year in California on everything from corkscrews to Cadillacs. "We do not want to serve as aiding or abetting the (federal Drug Enforcement Administration). But they (the dispensaries) are not exempt from the sales tax, so by law we have to enforce it," Yee said.

Yee's district encompasses all of coastal California from Santa Barbara to the Oregon state line and includes scores of marijuana dispensaries and thousands of medicinal users.

Estimates vary wildly on just how much taxable marijuana is out there. The state, facing $16 billion in red ink through the middle of next year, wants precise numbers. So far, it doesn't have them. State authorities are quick to point out that collecting marijuana taxes won't balance California's books - but every penny helps.

The Board of Equalization says it collected about $11.4 million in tax on some $142 million worth of medicinal marijuana sales in 2005-06, the most recent period for which numbers are available. That's likely a partial amount, because the board's taxation policy was adopted in October 2005, the final rule didn't go into effect until 15 months later, and it typically takes time to ramp up tax programs.

About 200,000 people across California are authorized by their doctors to use marijuana for medical reasons. The drug costs about $40 for an eighth of an ounce.

The sales of medicinal marijuana are tiny compared with other products, such as $20 billion in apparel sales and nearly $18 billion for office and school supplies. Even the smallest category - fuel and ice sales - among some four dozen listed by the tax board totals more than $414 million, nearly three times the level of the medicinal marijuana transactions. Marijuana vendors are listed as selling "general merchandise" - an attempt to give some anonymity to sellers who fear federal intervention.

Americans for Safe Access, a pro-medicinal marijuana group that favors similar programs nationwide, says the state's figures are deceptive. The group surveyed a representative sampling of California dispensaries and tallied their sales, then multiplied that amount by the number of dispensaries in the state. ASA estimated the paid sales tax at about $100 million, and the amount of taxable sales at about $800 million. "This is a significant amount of money in a tough budget year," said ASA spokesman Kris Hermes. "We'd rather have the Board of Equalization be the entity that gives out that number, but they say it goes directly into the General Fund and there is nothing that requires the dispensaries to indicate what they sell. I hope over time that they will consider it, so it's not just us saying that we represent $100 million annually in sales taxes," Hermes added.

A number of states have some form of medical marijuana law, including Washington, Oregon, Nevada, Alaska, Hawaii, Colorado, Main, Vermont, Rhode Island, Montana and California.
Capitol Weekly: The Newspaper of California State Government and Politics

A new source of state income? LOL....something that m.j. users have been stating for YEARS! Nice to see that they FINALLY picked up on how this benifits their pockets. This should prove to be incentive for states considering medical marijuana.

Have a good one!:jointsmile: