OAKLAND'S POT DISPENSARIES MAY FACE NEW TAXES

On Nov. 2, Oakland voters will be asked to decide whether medicinal
cannabis businesses in the city should pay $50 in tax for every $1,000
in gross receipts.

That is nearly three times the supplemental sales tax rate they
already pay and could contribute more than $1 million to Oakland's
general fund.

The measure would also create a new "Non-Medical Cannabis Business
Tax" of $100 per $1,000 of gross receipts if voters approve the
California-wide Proposition 19, which would legalize recreational
marijuana use.

The city's proposal, called Measure V, has the uneasy backing of
medicinal cannabis advocates and dispensary operators.

They support the 10 percent rate on recreational cannabis sales. And
they favored $50 over the $80-$120 per $1,000 rate for medical
marijuana businesses ?originally proposed by City Council members
Larry Reid and Rebecca Kaplan.

But even at $50, the hike would result in service cuts to patients,
argue opponents who favor a lower tax.

The new rate would be the highest in the region, and double the 2.5
percent proposed by Berkeley, Albany and Richmond.

Reid said 5 percent would not drive the dispensaries out of Oakland
and that profits were sufficient to support the tax.

He and Kaplan argue that the new rate would reflect the "extraordinary
oversight and regulation" cannabis operations require. They also said
the increased rate could generate $1.4 million in new taxes.

That amount is based on the $28 million in sales that Oakland's four
dispensaries were expected to produce in 2010. Currently there are
three permitted dispensaries in Oakland.

That number could rise to as many as eight this year if City Council
members approve permitting additional dispensaries.

In 2009, Oakland became the first city in the nation to levy a
supplemental 1.8 percent sales tax on sales of medicinal cannabis.
Dispensaries already paid the local 9.25 percent sales tax.

Supporters of the additional 1.8 percent tax argued that it would help
solve Oakland's budget woes. City of Oakland analysts put the amount
that dispensaries would pay to the city at $300,000-$500,000.? Under
the new rate, the amount could reach $1.5 million.

Oaksterdam University founder Richard Lee said the continued fall in
prices of cannabis would compensate for the higher tax rate. Likewise,
longtime supporter Jeff Jones said large dispensaries would likely be
affected the most because they make the most money. The 5 percent rate
might curtail their ability to expand, he said.

The Oakland Metropolitan Chamber of Commerce has not endorsed the
measure because the tax singles out a specific industry.

measure v

Shall the Oakland Municipal Code be amended to increase the business
tax rate for "Medical Cannabis Businesses" from $18 per $1,000 of
gross receipts to $50 per $1,000 of gross receipts, and creating a new
"Non-Medical Cannabis Business Tax" of $100 per $1,000 of gross
receipts, with all proceeds placed in the City's General Fund to be
used for any governmental purpose?