Horne: Medical marijuana is subject to 6.6 percent sales tax - East Valley Tribune: Ahwatukee Foothills

Horne: Medical marijuana is subject to 6.6 percent sales tax

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Posted: Wednesday, January 26, 2011 2:09 pm | Updated: 6:40 pm, Wed Nov 26, 2014.

Arizonans who get a doctor’s recommendation to buy medical marijuana are going to have to shell out a little extra money for the state.

But users, legal and otherwise, will still be able to wrap the drug in cigar-paper “blunts.”

Attorney General Tom Horne said Wednesday that the marijuana sold at state-regulated dispensaries being set up under Proposition 203 is subject to the 6.6 percent sales tax.

Horne acknowledged that the law, approved by voters, spells out only those who have a specific recommendation from a doctor are entitled to purchase the drug.

And he said that prescription sales are exempt from the levy.

“But that statute didn’t use the word ‘prescriptions,’” Horne said. “It used the words ‘written certification.’”

That was deliberate.

A 1996 voter-approved law allowing doctors to prescribe marijuana was never implemented because the U.S. Drug Enforcement Agency threatened to revoke all prescription-writing privileges of any physician who wrote such an order for a substance that remains illegal under federal law. This new law, mirroring the successful practice in other states, avoids that term.

Horne said that as far as he’s concerned, that ends the discussion.

“Since they’re not prescriptions, then, in my view, it’s taxable like anything else is taxable,” he said.

That conclusion by the state’s chief attorney means the Arizona Department of Revenue will be instructing dispensaries to start collecting the tax. That means not only the state’s 6.6 percent levy but any local sales taxes.

Chandler assistant city manager Pat McDermott said that city officials have not had discussions about a tax, but added that it is “safe to presume” is that most municipalities would enact one if the state does.

“We haven’t talked about it, because we were under the initial impression that it couldn’t be taxed,” McDermott said. “If it’s taxable and it’s put in the tax code, I would imagine that we would go ahead and do it too.”

Mesa City Manager Chris Brady expects Arizona’s municipalities will take the same approach to a tax, though he wasn’t sure yet what that will be. Cities typically develop a model tax code at the League of Arizona Towns and Cities, he said, to avoid disparities.

“I think we’d all try to be consistent,” Brady said.

Tempe expects the league will develop an ordinance to guide cities, but officials said the ultimate decision will rest with the City Council.

Gilbert spokeswoman Beth Lucas said town officials are aware of Horne’s position, but there have been no formal discussions.

The amount of money at issue is nothing to sneeze at. Horne figures the levy could generate $40 million for the state, an estimate he said is based on a Denver Post story on how much marijuana is sold through dispensaries in that community “and applying that pro-rata to the Arizona population.”

Andrew Myers, who managed the pro-203 campaign, expressed some concern.

“We’re not wild about the idea of increasing the cost of what essentially is medication for seriously ill people,” he said. But Myers said there would be no challenge.

Horne acknowledged his conclusion means those who buy marijuana with a doctor’s recommendation will pay taxes. And those who acquire it elsewhere, for any other reason, will not.

“Well, I suppose that’s true of all products if you buy contraband,” he said. “There have been problems with cigarette smuggling for that very purpose. You avoid taxes.”

The issue of how people might smoke the drug, legally or otherwise, comes in an attempt to outlaw the sale of the specialized rolling papers in Arizona.

“Blunt wraps” are rolling papers with some tobacco content. They are officially marketed to those who want to make their own cigars rather than buying one pre-rolled, most of which are done by machine.

On Wednesday, members of the Senate Committee on Commerce and Energy scrapped, at least temporarily, legislation proposed by the Cigar Association of America to ban the manufacture, sale or distribution of blunt wraps.

Lobbyist Steve Barclay told lawmakers there is no legitimate use for the papers. He said any claim by manufacturers and retailers that people are rolling their own cigars is belied by the fact that far more papers are sold than tobacco to fill them.

But Ron Tully, vice president of National Tobacco Co. said those arguments are a smoke screen.

“It’s a commercial plea to squeeze us out of the market,” he said. Tully told lawmakers that the products his company sells, including the line of Zig-Zag rolling papers, is crowding cigars off the counters of convenience stores.

Anyway, Tully said, the term “blunts” for a marijuana cigar actually comes from the original practice of drug users hollowing out a short, fat cigar, called a blunt, and replacing the tobacco. That practice, he said, would remain legal.

Sen. Michele Reagan, R-Scottsdale, who sponsored the legislation, pulled it from consideration amid various questions, including the idea of having Arizona ban an otherwise-legal product. But Reagan said she may recraft it, narrowing it to only ban the sale of these items to minors.

Tully said his firm has no problem with that.

Tribune writers Dan Zeiger and Garin Groff contributed to this report.

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