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San Jose's Pot Clubs Prove to be a Promising New Revenue Source

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For the last couple of years, medical marijuana has been a booming business in San Jose, but now it's also a promising new source of tax revenue, according to figures released Friday.

San Jose officials said the city's medical marijuana collectives paid $290,000 in the first month the city levied a 7 percent tax on businesses selling the drug.

Councilman Pierluigi Oliverio, who has led the city effort to regulate and tax medical marijuana collectives, called it a positive sign for the cash-strapped city that expects to lay off hundreds of workers this year to close a $115 million budget deficit.

Voters in November overwhelmingly approved an Oliverio-sponsored measure allowing the marijuana tax, which the council later set at 7 percent. Oliverio noted that if tax payments continue at the same level, the city would reap about $3.4 million a year from the tax.

"The new revenue collected has the potential to cover approximately 17 to 18 police officers or three libraries year-round," Oliverio said.

But that revenue could drop dramatically as a result of the City Council's decision last month to reduce the number of pot clubs from more than a 100 to 10.

The $290,000 was collected during the month of March, when the new tax took effect, and was paid by 73 collectives. Four collectives also have already paid their April tax, contributing an additional $20,000.

The marijuana tax is in addition to the city's business tax and
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state sales taxes, some of which are retained by the city.

But city records indicate about a quarter of the collectives may not be complying with the new tax law.

City officials have identified 105 collectives that have been issued city business tax certificates.

Officials said failure to pay triggers a 25 percent penalty, plus interest on late taxes.

On Friday, officials did not say which collectives complied with the new tax or how much each paid individually. But David Hodges, who founded the All American Cannabis Club collective, said his was among the dispensaies that didn't pay the tax.

"I did not pay it because the language in it would make what we are doing not legal," Hodges said.

But Goose Duarte, assistant general manager of the Harborside Health Center, said the dispensary is eager to comply with the city's rules.

"We're supportive of any regulations that the city puts into place that allow dispensaries to function in the city," he said.

Duarte said that the collective hasn't passed the 7 percent tax onto its patients. He said, however, that the added cost has forced the business to trim ancillary services such as acupuncture and counseling.

Those dispensaries that didn't pay their tax can expect to hear from the city soon.

"Once we move forward on our staffing plan for compliance, we will immediately be following up with each of the businesses that did not submit a tax form to us," city Finance Director Scott Johnson said. "We will look at each situation on a case-by-case basis to determine the extent of any tax, penalties and interest to be assessed."

City code enforcement officials next week plan to mail notices to all the collectives advising them of the pending regulations.

On June 8, the city's Planning Commission will review proposed marijuana collective zoning changes. The City Council will then vote on the zoning June 14, along with an ordinance regulating the clubs.

City officials expect in July to have more details on how collectives will apply to be among the 10 allowed to operate.

News Hawk- Jacob Ebel 420 MAGAZINE
Source: mercurynews.com
Author: John Woolfolk
Contact: Contact Us
Copyright: San Jose Mercury News
Website: San Jose's pot clubs prove to be a promising new revenue source


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Yeah... Well how about this little item. San Jose’s City Council, in their infinite wisdom, has decided to close down 100 Medical Cannabis Dispensaries. Apparently the 10 medical marijuana collectives that the City Council will allow to remain operational will be split up into 5 separate districts. In each of these five districts they will allow two collectives. In addition to the restriction in numbers of medical marijuana collectives that will be allowed, the new MMJ collectives will also be required to grow all of their medicine on-site at the dispensaries.

While a lot of the MMJ collective owners queued up to speak before the City Council, of the 100 medical marijuana collectives to be closed in San Jose “Medmar” feels that it fulfills one of the biggest requirements of the new Medical marijuana regulations and that is that the marijuana is to be grown on the premises. While Medmar medical marijuana dispensary has only been in existence for 13 months they claim 3000 members and no doubt a nice little slice of tax revenue as well.

Does it seem strange to anyone else that the city of San Jose is trying to restrict the number of MMJ collectives from 110 to just 10, this with the looming state and city tax deficits? Steve DeAngelo executive director of Harborside health center which runs MMJ dispensaries in both the east bay and the south bay displayed a copy of a check for $35,416 to the San Jose city council, which represented one month’s worth of marijuana sales tax that goes to the city of San Jose. To which the San Jose city manager’s office quickly confirmed it was cashing harborside health center’s check to be quickly added to the general fund. So if one was to extrapolate the $35,416 number by 12 months, you could figure that the city of San Jose is now going to be flushing down the toilet approximately $420,000 from one medical marijuana collective in tax revenue for the city of San Jose.

Assuming that harborside health center does twice as much business as other medical marijuana collectives; let’s say the average collective pays $15,000 a month in taxes to the city of San Jose. Again, multiplying that by 12 months we come up with $180,000 per collective that could be added to the general fund for S. J. Take that same $180,000 and multiply it by the same 100 collectives that they are about to put out of business and we come up with a smooth $18,000,000 for the general fund of the city of San Jose. This during a time in which the city projects a $115,000,000 deficit.
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