MEDICAL MARIJUANA DEEMED TAXABLE BY CITY OF PRESCOTT

PRESCOTT - Despite concerns that the move might be premature, the
Prescott City Council approved a measure this week clarifying that
medical marijuana is a taxable item.

During council discussions Tuesday about adoption of the 2011
amendments to the Model City Tax Code, much of the focus was on
medical marijuana.

While Arizona voters approved a medical marijuana initiative in
November 2010, the results of the initiative have since become mired
in litigation at the state level.

That uncertain status caused some debate among the council members
about whether the city should take action on the taxing issue at this
point.

"Why are we passing a model tax code model when the state hasn't
clarified it yet?" Councilman Steve Blair asked.

And Councilman Jim Lamerson questioned why the city would opt to tax
medical marijuana at all. "I don't like taxing things that are
intended to help people," he said.

But Assistant Finance Director Matt Dunbar explained that the addition
of a definition for medical marijuana simply mirrors the state's stand
on the taxability of the product.

By including it in the code, Dunbar said, the city is clarifying that
medical marijuana is a retail item and therefore taxable.

In fact, he said the sale of marijuana was always considered a retail
function, even though he allowed that no marijuana sellers are
currently paying sales tax.

By adding the definition to the tax code, Dunbar said the city is also
clarifying that medical marijuana would not have tax exemptions
similar to those granted to prescriptions drugs.

"What this does is, even if it is under the recommendation of a
physician, it is still considered retail sales," Dunbar said.

Because medical marijuana would be a "recommendation" of a physician,
and not a prescription, Dunbar said, "Basically, it's saying (medical
marijuana) is not going to meet any of the exemptions."

City Councilman Len Scamardo, a long-time member of the Prescott
Planning and Zoning Commission, pointed out that the commission
earlier considered a number of zoning-related issues regarding medical
marijuana.

"We decided not to get into the morality issue," he said of the
marijuana issues. "The voters voted it in."

The council voted 5-2 to approve the amendments to the Model City Tax
Code, with Lamerson and Blair voting against the motion.