is sales tax on marijuana legal?

Generally in California it is believed that medical marijuana is not subject to sales taxes imposed by the Board of Equalisation. But this is more of a working assumption than a legal ruling, buoyed by the fact that the bankrupt State is way short of employees needed to enforce any not-totally-solid tax provisions that the people are resisting.

What ticks me is that my local city is even failing to collect business taxes on marijuana ops in the city limits. We really need the revenue.

Steve

If a proposition can change the criminal law to legalize marijuana, it can certainly change the tax law to exclude mj from the sales tax drug exemption. It's just a statute, not a law of nature.

Fiddly rules about what's taxable and what's not are common. Look at the receipt the next time you go grocery shopping and see if you can understand the rules for what's taxable and what's not.

R's, John

One also has the alternative issue: Unless "rolled into joints" or otherwise processed, it is an unmodified, unprocessed part of a plant (i.e. biologic) meant for human consumption. Therefore, under the laws that deal with foods, "raw" marijuana would additionally be exempt from sales tax (as the law stands now).

(My answer anticipates "recreational use" which will appear on California's ballot in November 2010.)

Actually, plant-based herbal products are subject to sales tax in California, as are nutritional supplements. (For some reason, isolated soy protein or whey protein does not count as "food", even though some people use it as their main dietary protein source.)

Steve

Note that I said UNPROCESSED. Processed items are indeed subject to the tax.

"D. Stussy" wrote

"Recreational use"? Like while jet skiing? Playing frisbee with friends? Snowboarding?

Yes, as in "no doctor's prescription required."

"D. Stussy" wrote

.....and "no doctor's prescription" has slowed how many people down so far?

And if you think you do, I'll give examples where it depends on the location of the seller (and not by changing jurisdictions). E.g. a pound of nuts bought at a supermarket in NYC is not taxable, bought at an airport food stall it is.

Seth

The CCH from April 1 says that there is tobacco tax on out of state sellers, taxed on where it is delivered, so the sales tax laws will get challenged. I wonder whether marijuana would be covered by the law though -- it's kind of like tobacco.

All States?Multiple Taxes: President Signs Act Requiring Tobacco Tax Collection by Out-of-State Sellers

On March 31, 2010, President Barack Obama signed into law the Prevent All Cigarette Trafficking Act of 2009 (PACT Act), which imposes significant new restrictions on remote sales of cigarettes and smokeless tobacco, including a requirement that sellers collect all state and local tobacco excise taxes imposed where such sales are to be delivered. The law also forbids the deposit of cigarettes and smokeless tobacco in the U.S. mails and expands shipping, reporting and record-keeping requirements for sellers.

Specifically, sellers of cigarettes and smokeless tobacco ordered by telephone, the mails, or online, or delivered by common carrier or private delivery service, must comply with state, local, and tribal excise tax collection requirements as if the sale occurred entirely within the taxing jurisdiction where the items are delivered. However, state, local and tribal governments are preempted from requiring that a common carrier or a delivery service verify that all applicable taxes have been paid when delivering cigarettes or smokeless tobacco to consumers. The law does not affect agreements or limitations relating to the collection of taxes on cigarettes and smokeless tobacco sold in Indian country.

A sense of Congress statement explains that the law is not meant to create a precedent regarding the collection of state sales or use taxes by, or the validity of efforts to impose other types of taxes on, out-of-state entities that do not have a physical presence within the taxing state.

S. 1147, Laws 2010, effective 90 days after enactment

Not too many -- which is why the proposition to legalize marijuana in California will be on the ballot.

Of course it will still be illegal under federal law. So the out-of- state collection authority granted to the states under the new federal law won't apply to it.

Katie in San Diego