Tax Cheat or Hero? Medical Marijuana Tax Revolt Brewing

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?

– Read the entire article at San Francisco Weekly.