Tax Cheat or Hero? Medical Marijuana Tax Revolt Brewing

Categories: Marijuana
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Dave Hodges
Taxes are never far from Dave Hodges' mind. According to the state of California, Hodges, the founder and operator of the All American Cannabis Club in San Jose, owes almost a quarter million dollars in back taxes. According to Hodges, the state owes him -- about $11,000, in taxes he "mistakenly" paid.

Like every other medical marijuana dispensary in the state, Hodges paid state sales taxes in order to appease the Board of Equalization, which levies the same tax rate on pot clubs (8.375 percent, as of Oct. 1) as any other business. 

Except Hodges does not conduct sales. His collective, according to city law, receives donations in exchange for medical marijuana. And a donation is not a sale. The BOE told him so -- and now Hodges wants to tell other dispensaries how not to pay taxes, too.


California state law is not explicit one way or another on the legality of a marijuana "sale" -- and indeed, as recently as the spring, San Francisco District Attorney George Gascón's office filed a legal brief, which it since retracted, stating that all sales of marijuana are illegal (an odd stance to take in a city that had, at the time, more than 20 taxpaying medical marijuana businesses). 

Storefront marijuana businsses may operate as nonprofit collectives or cooperatives under laws and guidelines passed by the legislature and Gov. Jerry Brown. The state began collecting sales tax on every transaction in 2007. But is walking into a dispensary and exchanging money for OG Kush a "sale"? Is it a "donation" to cover the cost of producing and distributing the product? Or is it something else entirely?

Hodges, who blogs and advocates for the medical cannabis movement at SaveCannabis.org, says that his organization does not sell marijuana (which is one reason why he changed the name of his dispensary from San Jose Cannabis Buyers Club in 2011). Other dispensary operators tired of forking over nearly 10 percent of their take may be interested in Hodges' information symposium in San Jose on Oct. 19.

A main theme of the SaveCannabis.org Education and Planning Conference will be taxes -- namely, why and how not to pay them.

Hodges also refuses to remit taxes to the city of San Jose, which passed a local gross receipts tax on marijuana, Measure U, in 2010. That tax went into effect in 2011. Hodges doesn't pay that tax, either, because city law says gross receipts apply to sales -- and again, Hodges maintains he takes donations.

If his argument is correct, and if his argument is judged correct in court, the BOE could be hard-pressed to collect the $100 million in state sales taxes medical marijuana was estimated to produce prior to the 2011 federal crackdown that closed 400 dispensaries statewide. In other words, a tax revolt could be brewing.

"The BOE, in a legal opinion from their attorneys, have stated that a collective does NOT pay sales tax," Hodges told SF Weekly. "If I can prove in court we ARE a "collective" they owe me 11k in sales tax I mistakenly paid them."

Such a decision could be a ways off. Hodges filed his initial petition against the BOE a year ago. Only recently did he receive notice of an audit on his tax situation; an appearance in court could be "60 days to a year" away, he said Thursday.



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22 comments
christopher
christopher

Pay your taxes!

 

take a look at Norway,Sweden, and other highly taxed countries. the people there think tax is an investment-cause they gey so much out of it.

if the USA would get organized-use the tax from marijuana to really make a difference for the countries future

if the USA legalizes marijuana so many jobs will be available, the war on drugs could concentrate on drugs that really are hurting this country and the tax(which i feel should be high)

could do ALOT for this great country

thanks again

 

ps-PAY YOUR TAXES! 

 

pss- please dont call me names for my opinion (like mcdouche or baby or ........)

 

thank you

christopher
christopher

i think he should pay the tax. if the government sees how much money we can make from marijuana sales --they might make it legal nation wide. the tax and the end of expences are two great reasons the USA should legalize marijuana.

what is the incentive for the USA to legalize if no money is to be made.

i also co-own a business  and i pay tax - so do all other small businesses in this country.

the marijuana issue is to sensitive to start screwing with taxes

 

thank you for letting me speak.....

PeaceLove
PeaceLove

I applaud Mr. Hodges for his principled stance. He is 100% in the right here.

 

1. Mr. Hodges operates a non-profit collective that supplies medical cannabis to sick and suffering patients.

2. He has a letter from the BOE stating unequivocally that collectives do NOT have to pay taxes.

Therefore:

3. Mr. Hodges does NOT owe any taxes to anyone.

 

Taxing sick and suffering patients (since they're the ones paying the tax, ultimately) is immoral and unethical, in any case. We don't tax prescription drugs and we don't tax medicinal herbs. Cannabis is a natural plant and should not be taxed.

djjustinf
djjustinf

Yeah, until the law is amended to allow for profit sales, the cities nor the state should be expecting any sales tax money from any collective.

mrericsir
mrericsir topcommenter

So much for the argument that legal marijuana sales help out the state.  Thanks for ruining it for everyone, Greedy McDouche.

kevin_hunt
kevin_hunt topcommenter

Prop 215 is antiquated.  It needs to be amended to allow for-profit sales, since the vast majority of dispensaries are clearly operating as for-profit businesses.

 

 

Highlander420
Highlander420

 @mrericsir  I understand your feelings.  I am not up on the laws of California's MMJ, but do people in the state pay taxes on their prescription drugs?

rsteeb
rsteeb

 @mrericsir Measure U was on the same ballot as Prop 19, in anticipation of general legalization.  Sales tax would be appropriate at the 7-11 stores, if the herb were sold along with cigarettes and beer.  Taking revenue from ill folks' medicine expenditures is morally repugnant in addition to "greedy".   HTH.

ken31857
ken31857

 @mrericsir jj...Why should any of us have to pay taxes if we don't get any kind of cooperation or protection from the government? When local and state governments start standing up for the rights of cannabis growers and collectives, you can complain about them not paying taxes....you studid McDouche.

trichometrist
trichometrist

 @kevin_hunt That what RJ REYNOLDS is gearing up for!

Montesanto right in line with the Marlboro Man!

mrericsir
mrericsir topcommenter

 @ken31857 A gang could make the exact same argument.  You pay taxes because you live in this country, not because the government does exactly what you want all the time.  Quit acting like a baby.

kevin_hunt
kevin_hunt topcommenter

 @trichometrist Right, but anything has to be better than what we have now. 

 

RJ Reynolds isn't jailing the homegrown tobacco folks.

trichometrist
trichometrist

 @mrericsir  @ken31857  meaning the federal stance on medical eff-icy , pay taxes and have cannabis represented as a legitimate commodity.

 

mrericsir
mrericsir topcommenter

 @ken31857  @trichometrist Are you saying he cannot vote?

 

Because the phrase "taxation without representation" has a very specific meaning: that you elect the government that taxes you.  It does NOT mean that if you don't get your way 100% of the time then you don't have to pay taxes.

 

As much as I support the right to get high, I also support the government's right to prosecute tax cheats.

Doodler
Doodler

 @mrericsir where does it say "that makes it right" READ MY POST. I said there are loopholes in the tax laws of which everyone takes advantage. That is the problem. It has nothing to do with pot. If you want to debate, then discuss what I said - not your interpretation of it.

mrericsir
mrericsir topcommenter

 @Doodler  @ken31857  Oh yes, the "other people are doing it, that makes it right" argument. How original.

Doodler
Doodler

 @mrericsir  @ken31857 this guy is only doing what everyone does (especially the 1%) taking advantage of the loopholes in the tax laws. just because it involves pot shouldn't make a difference. save your insults for those who made the system so fcked up.

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