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San Jose Cannabis Tax Heading to Voters City Council approves ballot measure

By JESSICA GREENE
Updated 12:38 PM PDT, Wed, Aug 4, 2010

San Jose voters will get a chance in November decide whether to impose a tax of up to 10 percent on medical cannabis businesses in the city.

The San Jose City Council on Tuesday, with a 7-4 vote, approved a measure that will place the tax on the ballot. If it's approved, it will be the highest medical cannabis tax in the state.

Read the city council's original proposal

Proponents of the tax see it as a revenue source for the cash-strapped city. But medical marijuana patients and activists fear a 10 percent tax is too high and will drive those in need of the medication to neighboring cities where the prices will be lower.

Dave Hodges, the founder of San Jose's first medical cannabis cooperative, is one of the most outspoken advocates against the proposal. The businesses are already paying a 9.25 percent tax to the State Equalization Board so if the city leverages another 10 percent tax, that would amount to 19.25 percent on the medicinal products, Hodges says. That cost would trickle down to patients.

Hodges has been fighting the city since he opened the San Jose Cannabis Buyers Collective and the tax is just the latest battle. He submitted several suggestions to the city council ahead of Tuesday's vote and says his input made at least one impression.

"I'm glad they made one modification I recommended, adding the words 'up to' before 10 percent. I still have major concerns about the verbiage and structure of this ballot initiative. As is, it will be opposed by every cannabis-related business who does business in the city of San Jose."

The tax proposal serves as a "rally point for the San Jose cannabis movement," Hodges says.

A poll conducted last month indicated that 66 percent of likely voters were in favor of a 10 percent tax, and 68 percent were in favor of a 3 percent tax. It's unclear how much revenue the tax would generate because marijuana reporting and regulations are murky.

There are 73 marijuana collectives in San Jose, 40 of which have applied for a sales permit with the State Equalization Board, according to Scott Johnson, the city's finance director. Of those 40, 18 businesses have reported sales to the state with gross receipts of about $1.5 million.

Officials said the city could collect about $150,000 based on the state's reporting, but that number could be higher if voters legalize non-medicinal marijuana in November under Prop 19. If that measure passes, the tax would also apply marijuana sold for recreational purposes.

Bay City News contributed to this report.