Bay Area Pot Clubs Audited as State Goes on Fiscal 'Witch Hunt'

Categories: Marijuana
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Balancing the state budget with marijuana
It was big news for taxpayers and medical cannabis advocates alike when the Board of Equalization informed mega-dispensary Berkeley Patients Group that it owed some $6.4 million in back taxes.

And now it appears that BPG's run-in with the taxman is not an isolated incident.

While BOE spokeswoman Anita Gore told SF Weekly that "no directed enforcement activity" is being aimed at the state's medical cannabis dispensaries, "dozens" of Bay Area dispensaries have undergone audits in recent months, according to Kris Hermes, spokesman for Oakland-based Americans for Safe Access.

And at least one dispensary owner contacted by SF Weekly noted that BOE's single in-person visit was recently.

"It was the one and only time," said the dispensary owner, who asked not to be identified. "Before, we'd only corresponded and paid our taxes via the mails... it's very rare to hear or see from [the BOE]."

This news comes on the heels of a visit by the IRS to Marin Alliance for Medical Marijuana, who owes the federal government "millions and millions," according to owner Lynette Shaw.

What gives? Is the taxman trying to put dispensaries out of business?

That seems highly unlikely, according to ASA's Hermes.

"The BOE, unlike the IRS, has to strike a balance between the money they think they're owed between what [tax bill] would put the businesses funneling money into their general fund out of business," he said. "Because if they come down too hard, they will put them out of business."

That would mean more black market marijuana, and less tax money over time for the beleaguered state, which is struggling to plug a $26 billion budget shortfall.

"It would be very counterproductive to the state's livelihood," Hermes added. The most recent BOE estimate on sales tax revenue from cannabis dispensaries is between $58 million and $105 million annually, coming from as much as $1.3 billion in sales, according to Gore.
"We only have an estimate, because medical marijuana dispensaries don't have to declare that they're dispensaries, nor do they need to tell us," she said

And, at least outside of the Bay Area, she's right: Pot clubs can, and have, registered as "holistic healing centers" and other such entities in San Jose, Los Angeles, and elsewhere. Gore refused to say how many other dispensaries were undergoing audits, citing taxpayer confidentiality, while maintaining that dispensaries are subject to audits "just like any other retailer." Our dispensary source agreed. "I think it's probably not aimed specifically at dispensaries," the source said. "They're probably doing it to everybody, because the state is on a witch-hunt for money." Also at issue for many dispensaries is the notion of historic tax liabilities.

Cannabis dispensaries, which ostensibly sell medicine that is not taxed in California, did not received BOE sellers' permits until 2007. Yet the BOE maintains that dispensaries are liable to pay sales tax on medicine sold prior to 2007 -- sellers' permit or not.

Stay tuned, but don't surprised if this particular issue winds up in court.

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Jonathan Steigman
Jonathan Steigman

Disgusting. The BOE should be ashamed of itself for this ongoing assault on sick and suffering patients through a tax on their medicine. We don't tax prescription drugs and we don't tax medicinal plants. Who thought it was a good idea to tax cannabis?

Medicinal cannabis has been used for thousands of years to treat literally hundreds of serious physical and psychological conditions, from cancer, diabetes, arthritis and chronic pain to PTSD, ADHD, anxiety and depression. A tax on cannabis is a tax on sick and suffering individuals, period.

Courageous caregivers who risk imprisonment and financial ruin to bring much-needed medicine to patients should not be shaken down for immoral taxes. They should be celebrated as great American heroes.

Jonathan SteigmanCommunication DirectorAmericans for Safe Access, Silicon Valley chapter


Sick and get a script for marijuana is simply paying some corrupt doctor a couple hundred


The part i cannot understand is the feds/ GOV will raid,steal,prosecute dispensary owners, growers etc. But at the same time they are ok with accepting taxs and fees associated with the whole damm thing.. Isnt that a double standard, or if we want to get technical money laundering and wire fraud.......................Id like to make a citizens arrest please on uncle sam


Marijuana is not a "medicine". It is not regulated by the FDA. It is not dispensed by a pharmacy or by drug stores. It does not require a prescription. It has a "recommendation" from a doctor. I hear the going price of one is $200. When it is treated like all other controlled drugs, it might be considered a "medicine". Non-medicines are taxable and always have been - whether legal or not.


Your definition of medicine is interesting ... how convenient for pharmaceutical industry profitability! Do they pay you?

Actually, a medication is any chemical substance intended for use in the medical diagnosis, cure, treatment, or prevention of disease. It's got nothing to do with government controls.

SF Sex Toy
SF Sex Toy

Isn't it time for the gov to just accept weed? After all, about 20% of em' smoke it...

h. brown
h. brown

Chris, I understand that the Police Department has revoked your press pass because you don't cover, "breaking police news"? Since when is covering the Police Commission and the Board's Public Safety Commission and the Pot industry NOT covering cop related news?


William James
William James

I don't understand why it is not legal. Every thing used to be legal before prohibition of the 1920's I'm not a user and a barely consume alcohol, but I think people should be free to make their own choice no matter how stupid they may be.

It seems though that none of our law makers want to tackle the tough issues plaguing our society. It is like nobody is home that all eyes are vacant at the white house. http://penheadpress.blogspot.c...


oh noes more "black market" marijuana.. in SF if you buy it in a club or buy it from your buddy, it's probably grown by the same guy

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