CA: San Jose City Council Votes To Raise Medical Marijuana Tax

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SAN JOSE, CA — The San Jose city council voted unanimously Tuesday to increase the city’s tax on medical marijuana sales from 7 to 10 percent, starting in July.

The move is expected to generate an additional $1.5 million in tax revenue for the city each year.  The current 7 percent tax nets the city an estimated $3.9 million annually, city officials said, with the increase expected to bring a total of $5.4 million per year into the city coffers.

City officials say there are 96 medical marijuana dispensaries operating in the city currently, although they are technically illegal under both federal and city law.

“They’re allowed by state law and so we’re trying to accommodate people who have medical needs,” said San Jose Mayor Chuck Reed. “We will continue to try to do that, even though the law is a little uncertain.”

In 2011, the San Jose City Council adopted zoning and regulatory ordinances that would have limited the number of medical marijuana dispensaries in the city to ten, restricted the dispensaries to industrial-zoned areas, and would have required the dispensaries to grow all of their medical marijuana on site.

Shortly after the regulations were passed, medical marijuana activists argued the regulations were overly restrictive, and succeeded in qualifying a ballot referendum on repealing the rules.   Rather than send the referendum to voters, the council repealed the regulations in early 2012.

The repeal of the regulations essentially made medical marijuana dispensaries in San Jose technically illegal under city law, but the city has allowed dispensaries that pay the marijuana tax to remain open, as long as they are not located within 600 feet of a school.

Earlier this month, the California Supreme Court ruled that California cities can ban medical marijuana dispensaries completely, and some Bay Area communities have done so.

City officials in San Jose would prefer to regulate and tax the dispensaries, and hope to introduce new medical marijuana regulations by the fall.

In the meantime, the city will continue to tolerate those dispensaries that pay their marijuana taxes.

“There’s no reason they shouldn’t pay taxes on their operations just like other businesses,” Mayor Reed said.