SACRAMENTO - April 9th, 2008. - The State Senate Committee on Revenue and Taxation tabled Sen. Carol Migden's bill SB 1098 granting a sales tax amnesty to medical marijuana dispensaries for back taxes due before October, 2005. The Board of Equalization testified strongly in support of the bill, saying that the unusual measure of a tax amnesty was justified in this case because the Board had explicitly refused to grant permits for sales of medical marijuana before October 05. Sen. Migden's staff explained that an amnesty was necessary to protect well-meaning, established dispensaries from liability for back taxes. MJ advocates supported the bill, with Cal NORML testifying that the potential sales tax revenues from dispensaries is around $100 million.
Law enforcement, led by CNOA lobbyist John Lovell, vociferously opposed the bill, denouncing dispensaries as a problem of "crisis proportions", "magnets for criminal activity" , and a "backdoor way of legitimatizing [sic]" marijuana. He added that the state's DA's, police groups, and other LEOs had recently formed a working group specifically to address the crisis.
The committee, which had indicated reservations about approving the unprecedented measure of a sales tax amnesty, did not vote on the bill, but placed it in the suspense file, effectively killing it.
California NORML supported SB 1098 on the grounds that it would encourage marijuana to be treated like other legal products. Under Cal law, all herbal medicines not sold in pharmacies by prescription are subject to sales tax. In February, 2007, the Board of Equalization sent a special notice to California medical cannabis dispensaries advising them that they were liable for sales taxes. Many dispensaries have complied, in some cases paying $100,000s in taxes per year. Many others have yet to do so, some out of fear of exposing themselves to obligations for back taxes. Sen. Migden's bill would eliminate this threat for those dispensaries that promptly comply with the law.
California NORML estimates the total potential sales tax revenues from medical cannabis at $70 - $160 million per year, with a total statewide customer base of some 150,000 - 350,000 patients and a gross retail market of $800 million to $2 billion per year.
Text & Status of SB 1098