Tempe paving way for medical marijuana sales tax
by Dianna M. Náñez - Aug. 23, 2011 11:22 AM
The Arizona Republic
As state attorneys prepare to go to federal court to seek clarification of a law that voters passed last year making medical marijuana legal in Arizona, some cities like Tempe are paving the way to tax the drug.
Last week, the Tempe City Council had its first hearing on the possibility of amending the city's tax code so that those purchasing the drug in Tempe could be charged a 2-percent municipal sales tax.
The final hearing is scheduled for Sept. 8.
Ken Jones, Tempe's finance director, said that despite Arizona Attorney General Tom Horne's opinion that medical marijuana is subject to a sales tax, Tempe must first amend its tax code to tax the drug. Changes would include clarifying that medical-marijuana is not a food, which is taxed at a lower sales-tax rate.
The change comes after the Municipal Tax Code Commission in April approved changes to the Model City Tax Code allowing a city sales tax on medical marijuana. The commission is made up of a representative of the Arizona Department of Revenue and nine mayors or council members of cities or towns that have adopted the Model City Tax Code.
Ken Strobeck, executive director of the League of Arizona Cities and Towns, said that the commission is charged with maintaining consistent tax code so that taxpayers and businesses are able to easily understand tax structures. While cities must amend their tax code to clarify taxation of medical marijuana, it is up to each city whether they actually tax the drug, he said.
Voters approved Proposition 203 in November, legalizing medical marijuana use for people with certain debilitating conditions, such as cancer or Alzheimer's disease. The state began implementing the law but stopped and filed a lawsuit after a warning from the U.S. government.
Gov. Jan Brewer and Horne filed the lawsuit in late May asking a federal judge to determine whether compliance with the law would leave state employees, dispensary owners and patients open to prosecution for violating federal-drug statutes. The lawsuit came after U.S. Attorney Dennis Burke warned state pot growers and sellers that they could be prosecuted under federal law.
Joe Yuhas, a spokesman for the Arizona Medical Marijuana Association, which led the campaign for Prop. 203, said that piecemeal implementation of the law has confused patients who need the drug, doctors recommending it and businesses involved in the medical-marijuana industry.
His association supports a reasonable tax on medical marijuana but he fears that approving the taxation framework now would send another confusing message.
"I think this is another example of the chaos that the lawsuit initiated by our state leaders has created," he said.
Although some medical-marijuana supporters have argued that it is wrong to tax medical marijuana when other doctor-prescribed drugs are not taxed, Yuhas said his group left the issue of taxation out of the language of Prop. 203.
"We were purposefully silent on that provision to allow state and municipal leaders to take appropriate action, but we obviously don't want to price the product to the point to where it just drives patients back to the black market," he said.
Yuhas said the association supports taxing medical marijuana at the same rates residents would pay for other over-the-counter drugs.
"There are obviously enforcement activities and regulatory activities that are part of the initiative and we think it's fair that revenue be generated to cover the cost of those activities," he said. "The irony here is that our state leaders are preventing that from happening."
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