SHOULD CITIES TAX MARIJUANA?

Though It's Yet to Be Determined Whether Pot Is a Medical or Herbal
Remedy, It's Time to Consider Tax-Generating Structures.

Taxing medical marijuana sales is an idea worth considering, not
because it is a potential cash cow for fiscally constrained
governments, but because it could raise revenue needed to cover the
services the flourishing businesses will require.

But caution is in order. There are some dominoes that need to fall first.

The topic came up again last week, as Denver City Council members
Chris Nevitt and Charlie Brown publicly expressed support for
imposing a city sales tax on medical marijuana sales. "We've got to
tax this damn thing at the city rate, which is 3.62 percent," Brown
told us. "We're talking millions of dollars here."

And that may be. But some questions about legality of taxation and
the future of medical marijuana have to be answered first. And we
think that overall, cities such as Denver ought not look to the
emerging industry as a windfall that could close budget gaps.

First, the legality of taxing the commodity is up in the air.

Colorado Attorney General John Suthers is researching the issue, and
his decision will turn on whether the substance is deemed a
prescription or something more like an herbal remedy.

The latter seems more likely, since marijuana isn't a drug that has
been approved by the U.S. Food and Drug Administration. And herbal
remedies are already taxed.

Second, we don't think governments ought to take advantage of the
medical marijuana laws in the way that so-called "ganjapreneurs" have
been doing.

Meaning, governments would be just as wrong to reap great wads of
cash from back-door legalization efforts as are the mass
dispensaries, some of which are just barely pretending to be serving
the most infirm among us.

Amendment 20, which passed in 2000, did not approve the legalization
of marijuana in Colorado, despite the wishful thinking of some.

Furthermore, legislators are poised to address the medical marijuana
issue in the upcoming session, which begins in January, and their
decisions could seriously affect how medical marijuana is delivered
in Colorado. (See Alicia Caldwell's article from today's Perspective section.)

If their decisions shrink the number and reach of distributors, then
a basic sales tax should be enough.

But if lawmakers create a structure that encourages a broader
distribution model -- with attendant regulatory and service
requirements -- then other fees and taxes would be worth contemplating.

It would seem prudent, we think, to wait until the shape of medical
marijuana is more clearly defined before settling on a taxing structure.

It's smart to get ahead of the game and contemplate the tax and
revenue-generating alternatives. But we hope governments will exhibit
some foresight and restraint before they make decisions they might
have to revise once the medical marijuana landscape is clearly defined.