California Could Lose Millions in Tax Revenue Due to This Prop 64 Blunder

It’s probably safe to say that the creators of California’s Prop 64 probably didn’t intend to cost the state millions–before earning it billions–with the legalization of recreational marijuana. But that’s exactly what may have happened thanks to a legislative blunder that will give medical marijuana patients a lengthy tax holiday.

Prop 64 was designed to apply a 15 percent excise tax to all recreational and medical marijuana sales starting January 1, 2018. The excise tax would be tacked onto a 7.5 percent sales tax for recreational marijuana, but Prop 64 repealed that tax for medical marijuana.

According to the Washington Post, the tax exemption was intended to give medical marijuana users a tax break beginning in 2018, but the January 1, 2018 target date was regrettably omitted from the 62-page initiative. Therefore, the tax exemption went into effect this week once the initiative passed. The initiative’s creators argued that it wasn’t their intention to grant a 14-month tax holiday to medical marijuana users, but California’s Board of Equalization ruled otherwise.

“The resulting revenue loss for 2017 is estimated to be as much as $49.5 million,” said board member Jerome Horton, citing the total tax revenue collected from 1,632 dispensaries in 2014. “Local cities who anticipate preserving their revenue from medical marijuana may get nothing since Proposition 64 provides for a complete exemption from medical marijuana.”

There are precedents for ignoring legal provisions that clearly contain clerical errors, but the Board didn’t see fit to invoke them. That means the provision is legally binding, despite its financial implications.

This marijuana loophole has many people who were interested in using recreational weed considering medical marijuana cards as a more cost-effective alternative.

David Goldman, a medical marijuana patient and president of the Brownie Mary Democratic Club–the first politically affiliated Cannabis club in California–told the San Francisco Chronicle that he intends to keep using his medical card despite Prop 64 being passed.

“I purposely renewed my registration this month,” said Goldman. “If you spend more than $100 on cannabis in a month, you will probably do better if you get the state card.”

In order to become a medical marijuana patient in California, individuals must first obtain a recommendation from a doctor before applying for a Medical Marijuana Identification Card or MMIC with the California Department of Public Health, which includes a $100 fee.

Alexis Evans

Alexis Evans is an Assistant Editor at Law Street and a Buckeye State native. She has a Bachelor’s Degree in Journalism and a minor in Business from Ohio University. Contact Alexis at aevans@LawStreetMedia.com.