Mendocino County Weighs Pot Tax
Sun, 20 Mar 2005 © Press Democrat, The (Santa Rosa, CA)

Supervisors look to medical marijuana clubs as source of revenue to help close $3.5 million budget deficit

The lucrative, as-yet-untaxed medical marijuana industry is attracting the attention of Mendocino County supervisors in search of revenue.

"There are hundreds of thousands of dollars being funneled through these ( medical marijuana ) dispensaries," said Supervisor Jim Wattenburger.

County supervisors are mulling the idea of regulating and taxing pot clubs, a suggestion made by Wattenburger last week to help close the county's estimated $3.5 million deficit.

Mendocino County, already renowned for its illegal marijuana industry, has seen pot gardens and cannabis clubs blossom in open view following the 1996 passage of Proposition 215, which legalized the use of marijuana for medical reasons.

"It's become a major economic driving force," Wattenburger said. "It needs to be addressed like any other business."

Santa Rosa and Willits also are considering regulating pot clubs, but their stated motivation is controlling associated nuisances and crime rather than generating income. Oakland began regulating cannabis clubs last year.

Because they're not regulated, the number of pot clubs in Mendocino County is unknown. There were at least three in the Ukiah area until one was shut down last month after its owner sold pot to an undercover agent.

Supervisor David Colfax called Wattenburger's proposal to capitalize on medical pot clubs "a beautiful dream."

"If it were possible, I think it would be a great idea," he said. "I completely support the idea."

Supervisor Hal Wagenet, like Colfax, said he doubts the county can tax marijuana, but "I'm interested in exploring it."

Wattenburger's plan was born while he was campaigning door-to-door for his seat last year. In one north Ukiah neighborhood, he saw pot plants growing in the back yards of every third house. The ubiquity of suburban marijuana gardens has raised complaints about their skunk-like smell and crime, spurring Ukiah officials to work on an ordinance to limit backyard pot growing.

Wattenburger said a woman he knows told him she made $90,000 tax free last year growing pot in her back yard.

"She said she takes it to the cannabis club to cash in," he said.

It won't be so easy for the county to cash in on the crop.

Regulating and taxing medical marijuana locally could be complicated, maybe even impossible, Wattenburger admitted. While Proposition 215 legalized medical pot in California, the federal government still considers it illegal. State and local agencies have been reluctant to get involved because they fear losing their federal funding, he said.

"I don't know the answers. I'm asking that we explore the issue," Wattenburger said.

Only state and federal authorities have the power to tax income, but local jurisdictions can impose license and business fees.

However, license fees are limited. They're supposed to reflect the actual county cost of regulating businesses. Certain fees can be tied to income generated by a business, but they generally require voter approval, said Mendocino County Counsel Peter Klein.

Marijuana advocates largely support efforts to regulate and tax marijuana.

"I would love to see it happen to help our local economies out," said Dane Wilkins, executive director of the North Coast chapter of the National Organization for the Reform of Marijuana Laws.

Chris Conrad, with the Bay Area marijuana advocacy group, Safe Access Now, said he knows of a cannabis club that already pays sales tax by including its pot sales with income from its coffee shop. It does not tell the state some of its income is derived from pot, he said.

If everyone in Mendocino County paid income tax on their pot crops, legal and illegal, it would generate between $1.5 and $3 million for the county annually, Wagenet estimated.

Wattenburger expects his request to set up a committee to study the legalities and liabilities of regulating and taxing medical pot clubs to be on the board's agenda early next month.

HempPharm.com comment; "US Federal Gov't wants to keep marijuana illegal so it can fester a black market and draw kids into drugs and the voter approved and medical marijuana mandated State gov't is trying to make it legal so it can be taxed. Can't have it both ways guys! It is high time to regulate and tax this industry."