Medical marijuana sellers across the state would have millions of dollars in unpaid back taxes pardoned in an effort to spare them from bankruptcy and encourage them to pay sales tax under a bill introduced by a San Francisco lawmaker.
Although federal rules state that using marijuana is a crime, medical marijuana can be legally sold in California under a state law approved by voters in 1996. It wasn’t until 2005, however, that the California Board of Equalization ruled that medical marijuana dispensaries must pay sales tax.
As a result, many dispensaries that opened before 2005 have “massive” back-tax burdens that could force them out of business, according to Bruce Mirken, a San Francisco-based spokesman for the nonprofit Marijuana Policy Project.
“A lot of these dispensaries really do want to be responsible citizens and pay taxes as appropriate, but many of them weren’t sure what to do for a long time,” Mirken said.
A bill introduced recently by state Sen. Carole Migden, D-San Francisco, would forgive sales tax debts accrued prior to October 2005 if the marijuana traders register before April 2009 to pay sales tax.
Board of Equalization Vice-Chair Betty Yee said it would be “appropriate” to provide amnesty to the dispensaries because they didn’t charge sales tax to their customers before 2005.
Yee said although there’s no estimate for the amount of money that is owed by the dispensaries, it would be in the “millions of dollars.”
Providing back-tax amnesty to dispensaries that register to pay sales tax could help the state and its municipalities raise an estimated $25 million to $30 million a year in new sales tax receipts, according to Yee.
Forgiving dispensaries’ back taxes would encourage them to register to pay sales tax, according to San Francisco-based lawyer Matt Kumin, who represents dispensaries.
A total of 31 dispensaries in San Francisco have obtained city permits or applied for permits to operate legally in San Francisco, according to Planning Department official Tara Sullivan, who added that “many more” could be operating without permits.
Kevin Reed, who operates a cannabis delivery service in San Francisco, said new patients are given a brochure that explains that marijuana prices include sales tax, but “it’s an area nobody really wants to talk about,” so “we never mention it again.”