STATE LAUNCHES EFFORT TO COLLECT SALES TAX ON MARIJUANA

The state Board of Equalization wants to make it perfectly clear: Pay
sales taxes on marijuana or risk prosecution.

"The sale of medical marijuana is not exempt from sales tax," said
board Chairman Jerome E. Horton. Nor do illegal sales exempt people
from paying taxes, he said.

That's not new, but the board has launched a new effort to clarify
regulations, both for its own employees and medical pot distributors.

The clarification, combined with a crackdown on dispensaries that
have not been paying sales taxes, could reap billions of dollars for
the state, Horton said.

This week, the board ruled Berkeley Patients Group Inc. owes $6.4
million for failing to pay sales tax on marijuana sales between 2004 and 2007.

The group had claimed its marijuana was not taxable because it is
medicine, but there is no such tax exemption, Horton said.

The tax problem was uncovered through an audit triggered when staff
noted the dispensary reported more than $2 million a year in revenue
but claimed most of it was exempt, he said.

It's not known how many other pot dispensaries fail to collect sales
taxes because the Board of Equalization does not have a code for
marijuana sales and there has been a widespread culture of "don't
ask, don't tell" among its staff members, an issue raised during the
Berkeley case.

"To my surprise, we have no idea" how much tax money the state gets
from medical marijuana sales nor how much it could be losing in
revenue, Horton said.

Some staff members reportedly discouraged medical marijuana sellers
from applying for a state permit because they believed marijuana
sales are illegal, he said. The board has clarified the issue for
staff, Horton said.

Dispensaries that have not been paying sales tax could soon find
themselves in the same situation as the Berkeley cooperative.

Board of Equalization offices in Southern California have begun
comparing city and county medical marijuana dispensary permits with
state permits to see who is paying and who is not, Horton said.

He expects similar audits will be undertaken statewide.

That won't be a problem for most legitimate medical marijuana
dispensaries, said Dale Gieringer, state coordinator for the National
Organization for the Reform of Marijuana Laws.

Before 2007, many growers were unsure whether they needed to pay
sales tax, but it has since been clarified, he said.

"We pay about $120,000 a year in sales tax," said Jim Hill, president
of a 3,500-member cooperative. Its marijuana is grown in Mendocino
County but most of its members are in Southern California, he said.

The cooperative also pays about $14,000 a month in payroll taxes, he said.

Matt Cohen, who manages another Mendocino County cooperative,
estimated he pays more than $100,000 a year in sales taxes. It
distributes marijuana to about 1,000 members in nine Bay Area counties.

"We incorporated in '09 and we've been paying it the whole time," he said.