As the Berkeley Patients Group begins negotiations with the state board of equalization over a $6 million tax liability, the group – the city’s oldest medical cannabis dispensary – may soon be shelling out more than just marijuana pending a hearing later this month.
In 2007, the group was informed by the California State Board of Equalization that it owed the state $4.4 million in sales taxes – which is about $6 million with interest – from 2004 to 2007. Since then, the group has been paying taxes on its medical marijuana sales.
Although the group has been operating for 11 years, the audit only goes back three years, as specified by state law. Brad Senesac, chief marketing officer for the dispensary, said the legal language was unclear with regard to medical cannabis taxation and added that the dispensary is going to fight the retroactive taxes on that basis.
“We weren’t sure if we had to collect taxes or not,” Senesac said. “We were going based on what CVS would do … it’s a medication.”
He added that the state changed the legislation in 2007 regarding medical cannabis taxation.
However, these taxation laws have been in place since the 1930s, according to Anita Gore, deputy director of the external affairs department for the equalization board.
“There are no retroactive taxes … Whether or not someone has been appropriately applying the tax laws is different,” Gore said. “Medical marijuana has never been determined to be a medicine and exempt from taxes from a board of equalization point of view. If you go to your local drugstore and buy Tylenol or ibuprofen, you pay a tax on that. Anything that does not require a prescription is taxable.”
However, Caren Woodson, government affairs director for Americans for Safe Access, said marijuana is a drug that requires a physician’s recommendation and thus should not be taxed.
“All of these collectives are patient-owned, member-based and not-for-profit,” Woodson said. “If they’re forced to pay these extremely high audits, they go out of business or they choose not to pay, fight and potentially lose. Some of these businesses will just move back underground.”
The Berkeley Patients Care Collective, another Berkeley dispensary, faced similar negotiations with the equalization board for unpaid taxes dating back to 2005, according to the board’s summary from a hearing in September. The dispensary was found liable for the taxes, which amounted to more than $600,000.
“What people need to understand is that this is not a new issue,”
Senesac said. “It’s not a huge controversy; other dispensaries in the area are dealing with this issue as well.”