Pay taxes on pot, or else, state says – OC Watchdog – The Orange County Register

Declaring that “the unlawfulness of an activity does not prevent its taxation,” the state’s tax board reaffirmed its right to collect taxes on the sale of pot on Thursday.

“Sales of illegal medical marijuana and illegal marijuana in California are subject to tax,” said Jerome E. Horton, chair of the California Board of Equalization, in a prepared statement. “The United States Supreme court has ruled that, as a general matter, the unlawfulness of an activity does not prevent its taxation.”

Think of the broader implications!

Anyway, Horton wants to go much farther than this: He’s behind legislation to regulate the distribution of marijuana “as a way of controlling illegal sales and assessing tax when properly due.”

Said he: “The time is overdue for the state to provide leadership for this industry regarding the manufacturing and sale of marijuana similar to what we did for cigarettes and liquor. Such proposed controls will have the same effect of regulating and controlling sales and capturing the appropriate sales tax.”

Under the proposed legislation, the Board of Equalization would run a statewide licensing program for every marijuana grower, importer, wholesaler, and retailer. Medical pot would be taxed at “a rate equivalent to that imposed upon tobacco products,” and unlicensed distributors would be subject to fines of up to $5,000 and/or jail time of up to one year.

The whole thing grows out of a faceoff with the Berkeley Patients Group, a medical marijuana dispensary in NoCal. The Board of Equalization audited the co-op’s books for the three years between July 1, 2004 and June 30, 2007 — and decided that the co-op Group owes the state more than $6.4 million in tax and interest.


The Berkeley Patients Group has said that medical marijuana is medicine, and thus exempt from sales tax.

The Board of Equalization said, essentially, nice try, but forget it. ”The Berkley Patients Group is responsible for sales tax payments from 2004 up to the present for sales of medical marijuana,” the board concludes.

We don’t expect this is anywhere close to being over. We asked the Berkeley Patients Group to weigh in, and will let you know when we hear back from them.

Meantime, Orange County co-ops might want to collect sales taxes and forward them to the state. All sellers of marijuana are required to hold a seller’s permit and are required to file and pay sales tax, the board said again Thursday: “Persons who make sales without a seller’s permit are also generally subject to an eight year look-back period for taxes, penalties, and interest.”Ouch, indeed.What do you think?

via Pay taxes on pot, or else, state says – OC Watchdog – The Orange County Register.

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