State Officials Say Big Pot Discount Is for Real

The goods at the Emerald Exchange medical marijuana farmers marketEXPAND
The goods at the Emerald Exchange medical marijuana farmers market
Star Foreman/L.A. Weekly

Last week we reported that marijuana proponents were disputing a state tax official's declaration that California medical pot buyers were in for a big discount if voters legalize recreational cannabis on Nov. 8.

Some of the folks who helped write Proposition 64, the legalization measure, said that a medical marijuana tax cut the wasn't intended. But Jerome E. Horton, a member of the state Board of Equalization, said medical marijuana patients with state pot IDs would get a 5.5 percent sales tax break starting Nov. 9 if Proposition 64 passes.

While advocates of legalization, such as the Drug Policy Alliance, said Horton is wrong, fellow state tax officials now say he is partially right: They say the tax break would actually be bigger.

BOE officials say that they're already moving forward to implement that part of the law on Nov. 9. Their reading of it is that medical marijuana patients with state pot IDs would be able to get regular sales tax waived at the register. They said a city's medical marijuana–specific taxes would still apply, where they apply. The city of L.A. doesn't tax pot consumers but rather the business's gross receipts.

Sales tax in Los Angeles County is 9 percent but can go as high as 10 percent depending on the city. Whatever it is, you're supposed to get that cut from your medical pot bill immediately after the passage of Proposition 64, BOE officials say.

The tax-break idea, those who helped write the initiative say, was to offset the big sales tax — 15 percent — attached to legal pot under Proposition 64. They wanted medical patients to be able to get weed at recreational retailers without having to swallow such a huge price increase.

While Proposition 64 would allow Californians 21 and older to hold up to an ounce of marijuana starting the day after the election, most of the fine print, including regulations that would allow recreational retailers to open their doors, wouldn't take effect until Jan. 1, 2018.

Meanwhile, the BOE recently issued a special notice that the "sales and use tax exemption" would apply to retail sales of medical cannabis starting Nov. 9 — if Proposition 64 passes the previous day.

Horton, by the way, estimated that if Proposition 64 passes, the tax break would cost the state $49.5 million in 2017. But state analysts estimate that once the 15 percent rate kicks in after Jan. 1, 2018, as planned, the tax windfall could be as much as $1 billion a year.

State Officials Say Big Pot Discount Is for Real
California Board of Equalization

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