TEMPE PAVING WAY FOR MEDICAL MARIJUANA SALES TAX

As state attorneys prepare to go to federal court to seek
clarification of a law that voters passed last year making medical
marijuana legal in Arizona, some cities like Tempe are paving the way
to tax the drug.

Last week, the Tempe City Council had its first hearing on the
possibility of amending the city's tax code so that those purchasing
the drug in Tempe could be charged a 2-percent municipal sales tax.

The final hearing is scheduled for Sept. 8.

Ken Jones, Tempe's finance director, said that despite Arizona
Attorney General Tom Horne's opinion that medical marijuana is subject
to a sales tax, Tempe must first amend its tax code to tax the drug.
Changes would include clarifying that medical-marijuana is not a food,
which is taxed at a lower sales-tax rate.

The change comes after the Municipal Tax Code Commission in April
approved changes to the Model City Tax Code allowing a city sales tax
on medical marijuana. The commission is made up of a representative of
the Arizona Department of Revenue and nine mayors or council members
of cities or towns that have adopted the Model City Tax Code.

Ken Strobeck, executive director of the League of Arizona Cities and
Towns, said that the commission is charged with maintaining consistent
tax code so that taxpayers and businesses are able to easily
understand tax structures. While cities must amend their tax code to
clarify taxation of medical marijuana, it is up to each city whether
they actually tax the drug, he said.

Voters approved Proposition 203 in November, legalizing medical
marijuana use for people with certain debilitating conditions, such as
cancer or Alzheimer's disease. The state began implementing the law
but stopped and filed a lawsuit after a warning from the U.S. government.

Gov. Jan Brewer and Horne filed the lawsuit in late May asking a
federal judge to determine whether compliance with the law would leave
state employees, dispensary owners and patients open to prosecution
for violating federal-drug statutes. The lawsuit came after U.S.
Attorney Dennis Burke warned state pot growers and sellers that they
could be prosecuted under federal law.

Joe Yuhas, a spokesman for the Arizona Medical Marijuana Association,
which led the campaign for Prop. 203, said that piecemeal
implementation of the law has confused patients who need the drug,
doctors recommending it and businesses involved in the
medical-marijuana industry.

His association supports a reasonable tax on medical marijuana but he
fears that approving the taxation framework now would send another
confusing message.

"I think this is another example of the chaos that the lawsuit
initiated by our state leaders has created," he said.

Although some medical-marijuana supporters have argued that it is
wrong to tax medical marijuana when other doctor-prescribed drugs are
not taxed, Yuhas said his group left the issue of taxation out of the
language of Prop. 203.

"We were purposefully silent on that provision to allow state and
municipal leaders to take appropriate action, but we obviously don't
want to price the product to the point to where it just drives
patients back to the black market," he said.

Yuhas said the association supports taxing medical marijuana at the
same rates residents would pay for other over-the-counter drugs.

"There are obviously enforcement activities and regulatory activities
that are part of the initiative and we think it's fair that revenue be
generated to cover the cost of those activities," he said. "The irony
here is that our state leaders are preventing that from happening."