CLINICS TURN AGAINST POT TAX

Marijuana Activists, Angry Over L.A.'s Attempts to Limit
Dispensaries, Are Opposing Measure M.

When Oakland's voters slapped the nation's first tax on marijuana
sales a year and a half ago, the city's dispensaries backed the
ballot measure, pushing it as a way to be seen as legitimate businesses.

And when voters in 10 California cities decided on pot taxes in
November, the elections were largely uncontroversial. The taxes all
passed by more than two-thirds.

But in Los Angeles, where voters decide Tuesday whether to create a
pot tax, medical marijuana activists who once urged City Hall to tax
and regulate them are hoping to defeat the proposal, angered by the
council's decision to limit the number of dispensaries to 100 and
choose them by lottery.

"The city has done nothing for the patients, and I don't see why the
patients have to pay a sin tax. We're not a topless bar," said
Yamileth Bolanos, a dispensary operator who leads a group of the
city's oldest collectives. "The city hasn't even been able to enact
an ordinance that creates safe access."

Measure M would require the city's dispensaries to pay a 5% business
tax on gross receipts, which is 10 times more than the city's highest
tax. Councilwoman Janice Hahn, who proposed the tax, estimated that
it would raise at least $10 million. The city faces a $54-million
budget shortfall through June.

"It seemed to me it was a way to bring more revenue to the city to
keep us from laying off any more city workers, or firefighters, or
cops," Hahn said. "And I think it's a fairness issue. I think they
should pay their fair share of taxes to the city. We are expending
enormous resources to pass an ordinance that allows them to operate
in the city of Los Angeles. I mean, we've spent building and safety
time, city attorney time, city clerk time. We're going to be spending
code enforcement time."

The no campaign is low-key and low-budget, targeted at urging the
city's medical marijuana consumers - enough to support hundreds of
retail stores - to show up to defeat what opponents disparage as an
unfair tax on a medicine. But there are also a few heavyweight
opponents, including Police Chief Charlie Beck, Sheriff Lee Baca,
Dist. Atty. Steve Cooley and the city's two biggest daily newspapers.

On the yes side, the campaign is run by an Oakland political
consulting firm that worked on last year's marijuana legalization
campaign. The campaign is backed by some of the city's public
employee unions, but no dispensary has publicly endorsed it. "Some
are vehemently against, some are sitting on the side, and I would say
a few, but not many, recognize this is how business works and will
normalize their dealings with the city," said Andre Charles, a
consultant with The Next Generation.

The debate centers on whether the tax is fair or even legal.

Under the city's medical marijuana ordinance, dispensaries are
required to operate as nonprofits, though city officials believe many
do not. The city attorney's office has told the council that the tax
measure violates the city's municipal code, which exempts charitable
organizations from business taxes.

This is the main reason the Los Angeles Times and the Daily News of
Los Angeles editorial boards gave a thumbs-down to the initiative.

But many dispensaries that have business licenses from the city
Office of Finance are already paying city taxes. Antoinette
Christovale, the general manager, said her office does not track how
many dispensaries there are in the city or how much money is
collected from them.

Dispensaries cannot receive tax-exempt status from the Internal
Revenue Service because the sale of marijuana is illegal under
federal law. That means they cannot receive exemptions from the state
or the city, which rely on the IRS determination.

William W. Carter, chief deputy city attorney, said that his office
had to stick to the fact that Los Angeles' laws bar taxes on
charitable organizations, even if they are not tax-exempt. "We
interpret the law based on what it says in black and white, not on
how other departments have applied it," he said. The city attorney's
office, as the lawyers for the City Council, has not taken a position
on the measure.

Councilman Bernard C. Parks, who opposes the measure, believes
dispensaries would sue to overturn the tax. "If it passes, you'll be
saying a year from now, 'Where's the tax money?' " he said. He also
believes it would require the Office of Finance to add a layer of
bureaucracy. Christovale said her office has not studied what it
might cost to collect the tax.

Beck, who as police chief typically tries to stay out of politics,
said he opposes the measure because it undermines laws that allow
marijuana to be distributed only as a medicine and only by
nonprofits. "When we tax it, then we wink and nod toward the fact
that it is not a medicine, it is a recreational drug," Beck said. "I
think that it's a wrong position for the city to take. We're not
taking the moral high road. It's like saying, 'Hey, let's tax
prostitution because it's happening anyway.' "

Bolanos and other medical marijuana advocates also oppose the tax as
too high for a medicine. What proponents call a fair share is nearly
40 times as much as tobacco sellers and pharmacies pay. Dispensaries
are also required to charge sales taxes, which are 9.75% in Los Angeles.

But Hahn said she settled on a 5% gross receipts tax because it is
similar to what other California cities have imposed on the lucrative
businesses, including Oakland, which tripled its tax to 5% in
November. Oakland expects the tax to bring in $1.3 million this year,
enough to hire seven police officers.

The potential for revenue has drawn support from unions such as
United Firefighters of Los Angeles City and Service Employees
International Union, Local 721, which represents about 11,000 city
workers. "At the time of this financial crisis right now we need to
find more ways to generate more revenues," said Bob Schoonover, Local
721's president. "We're not really making a judgment call on this at
all, but marijuana is being sold, so we just think they should pay
their fair share of taxes, that's all."

SEIU 721 donated $5,000 to the yes campaign, the only reported
contribution so far. The campaign still hopes to raise $5,000 more.
The yes position will be on some slate mailers, and the campaign has
a Facebook page and a website, yesonlameasurem.com.

The no campaign, which also has a website, notaxonmedicine.org, is
largely the work of a few outspoken activists, including Bolanos and
Richard Eastman, who credits pot with helping him to suppress his
AIDS. "I don't believe my medicine is a sin," he said. "That's what
they're trying to sell with this tax."

Bolanos has spent about $800 raised from supporters and Eastman about
$500, mostly on literature ("Get the greed out of the weed!") aimed
at dispensary customers who would pay for the tax. "I'm going out to
as many dispensaries as I can," Eastman said. "I'm a working wrecking crew."