AZ: Medical-Marijuana Firms Blowing Off Maricopa County Assessor’s Tax Warning

Photo Credit: Michael Short

Maricopa County Assessor Paul Petersen announced with fanfare in August that he could squeeze $1.5 million in taxes from medical cannabis firms in 2017 by enforcing the law.

So far, the amount collected from dispensaries, cultivation facilities, and certification clinics has fallen short of estimate, and it’s still unclear just how much the county will take in.

Petersen held an uncharacteristic news conference six months ago to lambaste the medical-cannabis industry for failing to pay business personal property taxes. He warned that the days of lax enforcement were over.

The tax is levied on all the various items that businesses own apart from buildings, which the county assesses a separate tax. It’s standard in the business world, but for whatever reason, medical marijuana-related firms in Maricopa County haven’t gotten the message. Only 11 of 109 of the county’s medical-cannabis-related businesses had complied with letters asking them to identify and account for their firm’s personal property, he said at the time.

Companies that report their own estimated values in time qualify for an exemption of up to $159,498 in property each. That often covers the value of items in most small businesses, meaning they don’t pay the tax.

Peterson also mentioned the tax in an October 2016 op-ed published in the Arizona Republic. He argued that the industry’s lack of compliance with it was a good reason to vote against legalizing marijuana for adult use in Arizona.

Revenue from the tax helps fund county schools and community colleges, plus other tax districts.

Now, after Petersen’s alert via the news media, plus another round of mailed warning letters, the county has collected only an additional $135,321 for the 2017 tax year from 27 businesses, online records from the county Treasurer’s office show. Ten of those businesses paid half of their owed amounts; if they pay the other half, the county will collect an additional $60,406.

Using their own estimates, Petersen’s staff identified and assessed between $809 and $180,831 in business personal property for each business that failed to report, according to data released to Phoenix New Times last week. The taxes due appear on the website of the Treasurer’s office, which collects county taxes. Most of the unpaid accounts accrued an extra few hundred bucks in penalties.

The firms have until September to pay their bills. However, eight businesses that collectively owe about $600,000 still haven’t paid, meaning they may be preparing to appeal their assessments.

Petersen’s office also determined since August that 21 of 94 targeted businesses — four fewer than the 98 identified in August — are actually exempt.

Ryan Hurley, general counsel for the Arizona Dispensary Association, said it was safe to assume the cannabis firms that have been assessed the largest amounts will challenge those figures and pay a smaller bill.

“The numbers that we were talking about in the press conference were based on misconceptions,” Hurley said.

He said that one dispensary operator he talked with about the tax told him that “not only didn’t we have to pay, but we ended up getting a refund.”

(County records don’t reflect any refunds.)

One cannabis firm owner who asked to remain anonymous said that the county’s estimates of personal property at his business were nearly four times higher than they should have been. He’s asked the county to re-evaluate its estimate but has yet to hear back, Hurley said.

Petersen said he believes some of the “big ones” probably won’t end up exempt and will have to pay eventually.

“More importantly, there will be enforcement action down the road,” he said.

He plans to audit all of metro Phoenix’s medical marijuana businesses for the past three years.

“I find it astonishing” they haven’t paid the tax like most businesses, he said.

From the spreadsheet obtained from the assessor’s office, New Times located the business names for the top five largest assessments in each of four categories of medical marijuana firms. Petersen grouped the firms by evaluation clinics, cultivation centers, dispensaries, and “dual use” dispensaries that cultivate their own product.

New Times reached out to six of the businesses for comment; three representatives returned calls but declined comment.