San Jose to start taxing medical marijuana clubs

February 28, 2011 7:43:13 PM PST
Starting Tuesday, San Jose will start taxing medical marijuana providers, even though they say the businesses are operating illegally. The new tax in just the latest twist in a complex and confusing debate.

Dave Hodges feels like he is in the twilight zone. San Jose does not recognize his Cannabis Buyers Collective as a legitimate business but starting Tuesday, he is required to pay a 7 percent tax on his gross receipts.

"So what they are saying is, 'You are all drug dealers and you have to give us a cut,'" Hodges said. "It's bizarre, to say the least."

The city's finance department held a meeting Monday to explain the new tax, but the issue's legal complexities were off limits.

"Our focus today is simply to guide you through the reporting and remitting of the marijuana business tax," San Jose Finance Department Division Manager Wendy Sollazzi said.

City leaders say regulations for dispensaries are not yet in place, but they are working on them. In the meantime, voters overwhelmingly approved Measure U, which allows for up to a 10 percent tax on medicinal marijuana. The council settled on 7 percent as a way to help close a $110 million budget deficit.

"It will not fix our pension problem, but it may keep a library open or city staff still employed," San Jose City Council member Pierluigi Oliverio said.

There are about 100 medical marijuana dispensaries operating in San Jose. The 7 percent tax is on top of the state's sales tax. Some operators say they are fine with those collections because they seem to validate a budding business.

"It's a general fund issue so that's exciting to be able to help the city in a more direct fashion," Simply Chronic Healing spokesperson Preston Conley said.

"Give us a business license that says that marijuana is here in San Jose and we will pay the business license and then we can pay the tax fairly," Med Wellness Collective Center spokesperson Nicki Bock said. The first round of marijuana business taxes are due at the end of April.

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