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Washington Tries to Collect Tax From Medical Marijuana

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The Washington Department of Revenue has launched a statewide effort to collect sales tax from medical marijuana dispensaries – even as some prosecutors and the Health Department maintain such dispensaries are illegal.

Spokesman Mike Gowrylow said Tuesday the Revenue Department mailed letters to 90 dispensaries and related organizations, insisting that medical marijuana is not exempt from state sales tax and that dispensaries must collect that money and turn it over to the state.

The letters, sent Friday, said dispensaries must also pay the state business and occupation tax.

“We were contacted by a medical marijuana dispensary who was collecting sales tax and said many competitors weren’t,” Gowrylow said. “We went on the Web and tried to come up with all the names and addresses of medical marijuana dispensaries to inform them they’re required to charge sales tax.”

Medical marijuana activists were upset by the news, first reported by The Associated Press.

“My first reaction was, did they legalize it?” said Laura Healy, who helps run the Green Hope Patient Network in Shoreline. “How do you tax something that we’re technically not allowed to sell? You can’t have it both ways.”

Voters approved medical marijuana in Washington in 1998, but the law does not allow for marijuana sales. Instead, patients must grow marijuana themselves or designate a caregiver to grow it for them.

Because growing marijuana can be expensive and difficult, many patients have formed collectives to grow pot together, contributing dues to help cover costs. In the Seattle area, some collectives have dispensaries that serve thousands of members.

The law is silent on such collectives, and prosecutors around the state have taken differing views on whether they’re permissible. The state Health Department maintains they’re not.

Gowrylow said Tuesday the Revenue Department is “not involved in determining whether selling medical marijuana is illegal.”

“Our job is to administer state tax codes,” he said. “If you’re selling medical marijuana, it’s a retail sale.”

The department’s letter said medical marijuana isn’t exempt from the sales tax – as prescription medications are – because it can’t be prescribed under state and federal law. Washington’s law instead requires an “authorization” from a medical professional.

But medical marijuana advocates say such authorizations are functionally equivalent to prescriptions and should therefore be exempt from the tax.

“My (multiple sclerosis) patients, myself and my AIDS patients, we don’t have to pay sales tax on any of our other medications,” said Dale Rogers, director of The Compassion Program, a nonprofit patient collective in Seattle. “The fiscal responsibility is falling on the most poor and the sickest, and that is not fair.”

Seattle medical marijuana attorney Douglas Hiatt noted that authorities in some counties continue to raid dispensaries and prosecute their operators, while those in some other counties – including King County, the state’s largest – have allowed them to stay in business.

Requiring dispensaries to register with the state and pay sales tax could expose those involved to criminal prosecution, in violation of their Fifth Amendment right to avoid self-incrimination, Hiatt said.

Hiatt also said members of medical marijuana collectives volunteer or pay donations to offset costs. Such donations aren’t sales and shouldn’t be taxed, he said.

Washington isn’t the only state to address the marijuana taxation issue. Colorado and some California cities tax medical marijuana sold from dispensaries, said Mike Meno, spokesman for the Marijuana Policy Project in Washington DC. Maine and Washington DC, plan to collect such taxes once their dispensary laws are up and running.

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