The San Diego Union Tribune recently published an article highlighting the City of San Diego’s recent approval of recreational marijuana dispensaries. As has been implicit where it has been legalized elsewhere, when there is public acceptance of recreational marijuana the local governments are often anxious to regulate and derive the tax benefits from the success of the dispensaries. Per the article (follow link here):
No estimate of overall revenue was given, but the head of the Ocean Beach Planning Board said San Diego could receive as much as $30 million per year.
San Diego voters approved a local tax on recreational marijuana on Nov. 8 that would start at 5 percent and rise to 8 percent in July 2019. That tax would apply to pot farms and factories as well as dispensaries.
Having lived in San Diego, although Ocean Beach has become more affluent in recent years it remains a more liberal area of San Diego, making it apt for involvement by the Ocean Beach Planning Board. Tax remains at the forefront of any discussions regarding cannabis legalization even in more liberal areas.
Per the BOE’s site (update 12/2/18: page now removed):
Assembly Bill 266 (effective Jan. 1, 2016) enacted the Medical Marijuana Regulation and Safety Act, which established comprehensive statewide licensure and regulations for commercial medical cannabis activity. The Bureau of Medical Marijuana Regulation (Bureau) is responsible for administering the Medical Marijuana Regulation and Safety Act. Read the Bureau FAQs. Assembly Bill 266 also requires the BOE, in consultation with the California Department of Food and Agriculture, to adopt a system for reporting the movement of commercial cannabis and cannabis products throughout the distribution chain.
As a result, regulation (and thus taxation) are more than just incentivized but required if recreational marijuana is going to be allowed to be sold at dispensaries.
–Daniel W. Layton, the author of this post, is a former IRS trial attorney and former Federal prosecutor who was tasked with handling criminal tax prosecutions and civil litigation including tax refund suits, lien enforcement and foreclosures. As a tax attorney in private practice in Newport Beach, he uses his knowledge of IRS procedures and rules to keep the IRS in check and protect his clients’ rights. He may be contacted at (949) 301-9829.