- The Washington Times - Wednesday, November 18, 2009

DENVER | Colorado Gov. Bill Ritter Jr. on Tuesday directed the state’s medical-marijuana dispensaries to pay sales tax and obtain retail-sales licenses, bringing the once-taboo product closer to mainstream respectability.

Colorado is now the second state, behind California, to tax and regulate medical-marijuana sales, a move that comes on the heels of the Obama administration’s decision in October to leave enforcement of laws governing medical marijuana to the states.

The governor announced his decision after Colorado Attorney General John Suthers issued a statement Monday saying that medical marijuana is “tangible property that is generally subject to state sales tax.” The opinion was issued in response to a query from Mr. Ritter, a Democrat.

Advocates of medical marijuana applauded the move in the hope that it would remove the social stigma attached to marijuana use and bring order and oversight to the fast-growing but still nascent business.

Todd Davis, president of Colorado Medical Marijuana, a referral and registration service, said the Obama administration’s announcement pushed the industry into overdrive.

“It’s amazing. [The dispensaries] are popping up everywhere,” Mr. Davis said. “We’re getting 25 calls a week with people wanting to start up a dispensary or become a caregiver. That’s what alarmed all the politicians in Colorado - they threw this in our lap and we’ve got to find some form of regulation here.”

Ritter spokesman Evan Dreyer said that some dispensaries were already paying sales tax, but the attorney general’s opinion makes it clear that the practice needs to be uniform. Some pharmaceutical products are not subject to sales tax.

“The [attorney general’s] opinion clears that up and the Department of Revenue will be sending a letter to the dispensaries to inform them of the opinion,” Mr. Dreyer said.

Then there’s the money. Adding medical marijuana to the list of taxable items is expected to boost revenue at a time when state finances are struggling.

Colorado has an estimated 100 “brick-and-mortar” dispensaries, namely those that operate from storefronts. At least 1,000 individuals are listed as medical-marijuana caregivers who deliver the product to patients and would be subject to the sales tax as well.

Mark Couch, legislative liaison for the Colorado Department of Revenue, said that the agency has reviewed the records of 60 dispensaries and found that 29 were paying sales tax.

Colorado Sen. Chris Romer, a Democrat, estimated that the state could collect up to $15 million a year on the sales, and that communities could collect an additional $45 million a year through city and county taxes, according to the Associated Press. Mr. Romer said he plans to introduce legislation in January that would require dispensaries to buy licenses and pay the state’s 2.9 percent sales tax.

In California, an estimated $200 million in medical-marijuana sales are subject to the state sales tax of 8.25 percent, yielding about $16.5 million in revenue annually.

Some cities have jumped on the revenue bandwagon by adding municipal taxes. Earlier this year, Oakland approved a 1.8 percent city tax on medical cannabis sales. Denver also plans to collect a city sales tax on medical marijuana starting in December.

That’s OK with Dale Gieringer, director of California’s National Organization for the Reform of Marijuana Laws.

“Now people have a place they can go where they’re accountable, they employ people, they pay sales tax, they even pay health insurance,” Mr. Gieringer said. “Contrary to the predictions of our opponents, the sky has not fallen.”

Fourteen states have legalized medical marijuana, but California and Colorado are unique in their use of storefront dispensaries. Three other states - Maine, New Mexico and Rhode Island - are now moving to license providers, said Bruce Mirken, a spokesman for the Marijuana Policy Project.

“Certainly California and Colorado are the only states where it’s happening on a large scale,” Mr. Mirken said.

The announcement drew little protest among state officials. Colorado voters approved medical-marijuana use in 2000 with the passage of Amendment 20.

“If we’re going to follow the spirit of the voters who approved medical marijuana but did not legalize marijuana, then we have to recognize that it’s a product with a medical purpose,” said state Sen. Greg Brophy, a Republican.

• Valerie Richardson can be reached at vrichardson@washingtontimes.com.

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