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Medical Marijuana Not Tax-Exempt

The latest target for California tax collectors is the state’s medical marijuana business.

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The California Board of Equalization, which collects taxes and fees, last week announced that medical marijuana is not exempt from sales tax like other prescribed medicines.

The case arose after the Board audited Berkeley Patients Group, Inc. in Northern California. The marijuana dispensary argued that the $51 million of marijuana it sold between July 1, 2004 and June 30, 2007 should be exempt from sales tax. The board disagreed because state tax code doesn’t have a specific exemption for the marijuana, and said the dispensary owes more than $6.4 million in back taxes and interest.

The Board also confirmed that dispensaries need a seller’s permit. Those without one could be subject to an eight-year look-back period for taxes, penalties and interest.

The California tax authority estimates that it now collects $58 million to $105 million in sales tax on annual retail sales of $700 million to $1.3 billion of medical marijuana. Board Chairman Jerome Horton wants to see legislation that licenses all marijuana growers, importers, wholesalers and retailers in the state. “Such proposed controls will have the same effect of regulating and controlling sales and capturing appropriate sales tax,” he said in a board press release.

Other California medical-marijuana dispensaries are lobbying Congress and the IRS to clarify the section of the tax code known as 280E to exempt medical marijuana distributors. A few well-known legislators including Massachusetts Rep. Barney Frank and California Rep. Peter Stark have written the IRS supporting this cause.

Readers, do you think medical marijuana dispensaries should be taxed?




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Comments (5 of 23)

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