San Jose Collects First Month’s Marijuana Tax: $290,000


Photo: Jeff Chiu/AP
San Jose’s medical marijuana dispensaries paid $290,000 in taxes to the city for March — even though they are officially considered illegal

​San Jose, California now has its first month’s worth of marijuana tax in hand. “As of May 10, 73 medical marijuana collectives have remitted approximately $290,000 in taxes for the month of March,” the city announced on Friday.

Until the money was counted, nobody had been quite sure exactly how much San Jose’s medical marijuana tax might yield for the city’s empty coffers.

Starting March 1, San Jose slapped a seven percent tax on medical marijuana dispensaries under a measure city voters overwhelmingly approved last November. Even though San Jose officially considers all 100 or so of its dispensaries to be unlawful, pot providers are still required to pay the special marijuana tax to the cash-strapped city.

Most dispensary owners always assumed taxation would also mean legal acceptance, but now it appears the beleaguered providers will be catching it from both sides: they’re still subject to police raids at the same time they are responsible for paying taxes.
San Jose has emerged as a key medical marijuana battleground in California, but that hasn’t stopped its broke city government from wanting a piece of the financial action.
City officials claim that taxes must be paid on medical marijuana sales, regardless of the dispensaries’ legal status. Though most local shops were already paying city business and California sales taxes, city officials claimed they weren’t getting their fair share.
But meanwhile city officials said in a February memorandum that a review has determined that all of the known medical marijuana dispensaries in town violate council guidelines limiting them to commercial areas and requiring them to be at least 500 feet from homes, schools, libraries, daycare centers and each other.
The whole situation understandably seems surreal to San Jose’s dispensary owners. 
“It’s in the code that you have to tax these businesses, but you don’t have to — even when you take their money — say they’re legitimate businesses,” said David Hodges, founder of the San Jose Cannabis Buyers Collective, which relocated after city code enforcers threatened to fine its landlord.

Photo: San Jose Inside
City Councilman Pierluigi Oliverio was the first in San Jose to see the green tidal wave of marijuana and money coming

​San Jose saw the number of dispensaries go from zero to more than 100 in less than two years after City Councilman Pierluigi Oliverio suggested the city consider allowing and taxing a limited number of them. Voters — who have seen city services cut due to budget shortfalls — approved the Oliverio-sponsored tax, Measure U, with 78 percent approving it last November.
San Jose is facing a 10th straight year of red ink, looking at a $110 million deficit this year. City officials were eager to start collecting the new tax, even though zoning regulations allowing the shops are still months away from a vote.
According to Friday’s letter, signed by Deputy City Manager Deanna J. Santana, Director of Finance Scott P. Johnson, and Director of Planning, Building & Code Enforcement Joseph Horwedel, San Jose’s Marijuana Business Tax (MBT) “is due monthly or or before the last day of the following month,” so March’s taxes were due on April 30.
City staff members have identified about 105 medical marijuana collectives currently operating in San Jose which have been issued business tax certificates.
“The Finance Department is working with the City Manager’s Budget Office to develop a Marijuana Business Tax forecast, but this forecast can only be considered preliminary given the limited amount of collection data and the many factors that need to be integrated into the revenue projections,” the letter reads. “These factors include future business closures and the impact of implementation of the City’s Medical Marijuana Regulatory Program.”
According to the letter, the City Manager’s Office will, later this month, issue a Manager’s Budget Addendum “that will reflect all of the budgetary actions required to implement and sustain the Medical Marijuana Regulatory Program.” 
Regulatory efforts will “include on-going periodic revenue compliance audits of all collectives operating in the City, and implement immediate compliance actions on those Collectives that did not remit timely tax payments,” the letter reads. “A failure to pay on or before the due date results in a penalty of 25% of the amount of the tax due, plus interest on the unpaid tax.”
The city apparently plans to enforce zoning regulations, land use regulations and state law (such as the enforcement of an existing state law prohibiting marijuana dispensaries within 600 feet of schools) to reduce the number of dispensaries in San Jose to only 10 by September.
On a “Preliminary Implementation Timeline” published in the letter, “GOAL: Select 10 Collectives and Process Registration with the City” is seen as a “deliverable milestone” for September.
For the most up-do-date information on the implementation timeline for San Jose’s establishing zoning and land use regulations for dispensaries, visit the city’s medical marijuana web page.