Voters OK Measure to Tax Pot Dispensaries

Measure M was one of 10 measures on Tuesday's ballot

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    LOS ANGELES, CA - OCTOBER 19: Various types of marijuana are on display at Private Organic Therapy (P.O.T.), a non-profit co-operative medical marijuana dispensary, on October 19, 2009 in Los Angeles, California. Attorney General Eric Holder announced new guidelines today for federal prosecutors in states where the use of marijuana for medicinal purposes is allowed under state law. Federal prosecutors will no longer trump the state with raids on the southern California dispensaries as they had been doing, but Los Angeles County District Attorney Steve Cooley recently began a crackdown campaign that will include raids against the facilities. Cooley maintains that virtually all marijuana dispensaries are in violation of the law because they profit from their product. The city of LA has been slow to come to agreement on how to regulate its 800 to 1,000 dispensaries. Californians voted to allow sick people with referrals from doctors to consume cannabis with the passage of state ballot Proposition 215 in 1996 and a total of 14 states now allow the medicinal use of marijuana. (Photo by David McNew/Getty Images)

    The cash-strapped city of Los Angeles will soon have a new source of revenue, with voters backing a measure to tax medical marijuana dispensaries.

    March 8 Ballot Measures

    Measure M allows the city to collect $50 out of  each $1,000 in "gross reimbursements'' that dispensaries receive from their  patients. That could generate $10 million a year, which the city can use to pay  for basic services such police, libraries and street repairs, according to  proponents.

    "This is something we cannot say 'no' to,'' Councilwoman Janice Hahn said.

    But the city and county's top law enforcement officials disagree.

    Police Chief Charlie Beck, Sheriff Lee Baca and District Attorney Steve  Cooley all signed the argument against Measure M, pointing out that federal law  bans growing, possessing or consuming marijuana for any purpose.

    "The city should not place a tax on something our federal government  considers a Schedule I narcotic and against the law," they argued.

    Testifying before the City Council last year, Los Angeles' principal tax  compliance officer, Larry Manocchio, also noted that collectives are  classified as nonprofit organizations and therefore cannot be taxed.

    But Hahn disputed the notion that the city would be taxing "profits''  from the sale of medical marijuana. She said the city would instead be taking a  portion of what patients give dispensaries as ``reimbursement'' for the costs  associates with cultivating weed, such as worker salaries, rent and utilities.

    Several other cities have already imposed such a tax, Hahn said. San  Jose and La Puente each charge $100 per $1,000 in gross reimbursements; Oakland  and Richmond, $50, Sacramento, $40; and Berkeley, $25. Long Beach is  considering a tax of $50.

    The council amended its medical marijuana ordinance last month after a  judge ruled parts of it unconstitutional. The vote legitimized dispensaries  that opened on or before Sept. 14, 2007, and banned the rest.

    To break up clusters of dispensaries, they decided to select only 100 of  them to undergo inspections, and then hold a lottery to determine their order  on a "priority list.'' Those at the top of the list will get the first pick of  locations.

    There are hundreds of collectives across Los Angeles, but only nonprofit  organizations whose members cultivate marijuana for medical purposes are  considered legal.