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Berkeley's largest medical marijuana dispensary owes about $6 million in state sales taxes and interest for a three-year period in which it didn't pay.
The disputed taxes are at the center of an argument over whether medical marijuana should be free of sales taxes like other prescription medicines.
Berkeley Patients Group got the tax bill for $4.4 million with interest and penalties in 2007 and has been disputing it ever since, said spokeswoman Elisabeth Jewel. Subsequent interest has brought the tab to $6 million.
The dispensary has a hearing at the state board of equalization, which collects sales taxes, on Feb. 22. After that the plan is to enter the board's "compromise" program, where the two will negotiate a payment and start on an installment program, Jewel said.
Jewel could not say how much Berkeley Patients Group makes in sales per year, but that it pays about $1.8 million in sales taxes each year. A city of Berkeley report in 2010 said all three of Berkeley's dispensaries sell about $18 million a year in pot, and Berkeley Patients Group sells almost all of it.
A second spokesman for the dispensary, Brad Senesac, said the nonprofit did not pay state sales taxes in 2004, 2005 and 2006 on the assumption that medical marijuana would be classified like other prescription medicines, which are not taxed. Eventually the state decided it would not be considered along with other prescription medicines. And in sales tax forms
provided by the state, he said, there was no category for medical marijuana, making the rules even more unclear.
"Initially we thought it was going to be like other medicines with no tax, so Berkeley Patients Group didn't pay taxes," Senesac said. "And legally there was no category for medical marijuana in the forms for sales taxes."
Senesac said the tax bill is unfair because the tax rules on medical marijuana were unclear for years, and when the state's take on it became more clear in 2007, "they said, oh, wait a second, we're going to make your bill retroactive to 2004."
Board of equalization spokeswoman Anita Gore agreed the rules and policies were unclear, but that it's no excuse for not paying taxes.
"There was a time when we would not register sales taxes for the sales of illegal items, but if they were in business and making sales, taxes would have been due," Gore said.
Gore said California estimates it collects between $58 million and $105 million per year in medical marijuana sales taxes. She said the numbers are a range because dispensaries self-report their sales and may be selling other items alongside marijuana.
"A lot of these places sell any number of things, including books, coffee mugs or whatever and all those things are taxable," Gore said.
Senesac said Berkeley Patients Group did not set aside millions in dollars for taxes just in case it would be hit with a bill later because as a nonprofit its books must show a zero balance at the end of each year.
"If we had put aside $6 million, it wouldn't look good," Senesac said, adding that having done so would have increased chances of a raid by the U.S. Drug Enforcement Agency.
News Hawk- GuitarMan313 420 MAGAZINE
Source: mercurynews.com
Author: Doug Oakley
Contact: Help
Copyright: San Jose Mercury News
Website: Berkeley medical marijuana dispensary owes state $6 million in taxes
The disputed taxes are at the center of an argument over whether medical marijuana should be free of sales taxes like other prescription medicines.
Berkeley Patients Group got the tax bill for $4.4 million with interest and penalties in 2007 and has been disputing it ever since, said spokeswoman Elisabeth Jewel. Subsequent interest has brought the tab to $6 million.
The dispensary has a hearing at the state board of equalization, which collects sales taxes, on Feb. 22. After that the plan is to enter the board's "compromise" program, where the two will negotiate a payment and start on an installment program, Jewel said.
Jewel could not say how much Berkeley Patients Group makes in sales per year, but that it pays about $1.8 million in sales taxes each year. A city of Berkeley report in 2010 said all three of Berkeley's dispensaries sell about $18 million a year in pot, and Berkeley Patients Group sells almost all of it.
A second spokesman for the dispensary, Brad Senesac, said the nonprofit did not pay state sales taxes in 2004, 2005 and 2006 on the assumption that medical marijuana would be classified like other prescription medicines, which are not taxed. Eventually the state decided it would not be considered along with other prescription medicines. And in sales tax forms
provided by the state, he said, there was no category for medical marijuana, making the rules even more unclear.
"Initially we thought it was going to be like other medicines with no tax, so Berkeley Patients Group didn't pay taxes," Senesac said. "And legally there was no category for medical marijuana in the forms for sales taxes."
Senesac said the tax bill is unfair because the tax rules on medical marijuana were unclear for years, and when the state's take on it became more clear in 2007, "they said, oh, wait a second, we're going to make your bill retroactive to 2004."
Board of equalization spokeswoman Anita Gore agreed the rules and policies were unclear, but that it's no excuse for not paying taxes.
"There was a time when we would not register sales taxes for the sales of illegal items, but if they were in business and making sales, taxes would have been due," Gore said.
Gore said California estimates it collects between $58 million and $105 million per year in medical marijuana sales taxes. She said the numbers are a range because dispensaries self-report their sales and may be selling other items alongside marijuana.
"A lot of these places sell any number of things, including books, coffee mugs or whatever and all those things are taxable," Gore said.
Senesac said Berkeley Patients Group did not set aside millions in dollars for taxes just in case it would be hit with a bill later because as a nonprofit its books must show a zero balance at the end of each year.
"If we had put aside $6 million, it wouldn't look good," Senesac said, adding that having done so would have increased chances of a raid by the U.S. Drug Enforcement Agency.
News Hawk- GuitarMan313 420 MAGAZINE
Source: mercurynews.com
Author: Doug Oakley
Contact: Help
Copyright: San Jose Mercury News
Website: Berkeley medical marijuana dispensary owes state $6 million in taxes
