Berkeley cannabis collective struggles with back taxes

Erik Miller stands in front of poster of Patients Care Collective

It’s been four months since the Berkeley Patients’ Care Collective on Telegraph Avenue received formal notice that it owes the state $639,000 in back taxes, yet the group still doesn’t know how it is going to pay its bill.

The medical cannabis group, which has deliberately kept itself small to retain its customer-friendly atmosphere, sells about $1.8 million of medical marijuana each year, according to its manager Erik Miller. While that might sound like a lot, by law the group cannot make any profits. Those funds just pay for the cannabis, the rent, and the salaries of 11 employees. There are no hidden or stashed funds with which to pay back the government, he said.

“That’s the perception, that we are rolling in money here,” said Miller earlier this week. “It’s not true. I drive an 18-year old car.”

Complicating factors are the new taxes that Berkeley is imposing on its three dispensaries. The Patients Care Collective must pay a 2.5% tax on the cannabis it buys and a 2.5% tax on the cannabis it sells – on top of the state’s sales tax.

So far, the group has not passed on its increased costs to customers, said Miller. He is not sure what will happen when the collective has to start paying back the tax.

“I just couldn’t see raising the price higher. We’ve absorbed the (tax). We’ve cut expenses. We’ve all taken a pay cut in order not to raise the price for the patients.”

Two employees help patients select medical cannabis

The Patients Care Collective has entered into California’s Offer in Compromise program, which permits companies with back taxes to work out a payment plan. The program is aimed at helping companies stay in, rather than go out, of business.

Miller said they group has hired a tax attorney and will still try to get the tax liability reduced. He thinks the collective may ultimately only have to pay 1% to 2% of what is owed.

The Patients Care Collective opened in 2001 at 2590 Telegraph Avenue and could not be more different than the best-known cannabis collective in Berkeley, the Berkeley Patients Group on San Pablo Avenue. That organization has 13,000 members, serves from 800 to 1,000 people a day, sells a vast array of plants and devices, allows consumption in a lounge area, and offers acupuncture and massage, among other services. Many of the BPG founders and officers are vanguards in the movement to professionalize medical marijuana.

The Berkeley Patients Care Collective, in contrast, is small and subdued. Walking down Telegraph Avenue, the collective is even hard to spot. There is no sign on its awning and the green cross and collective name painted on a high window is difficult to see. The best indication that there is a medical marijuana collective inside is the presence of two burly, but friendly, guards outside.

The collective is only about 450 square feet partitioned by a curtain that separates a bank of computers where employees check patients’ medical registration from a glass fronted case with the medical cannabis. The collective does not sell plants or pipes (this is Telegraph Avenue, so its easy to find smoking devices nearby) and does not allow consumption on the premises.  About 70 to 90 patients come in each day.

The low-key atmosphere is deliberate, said Miller.

“We wanted to be more of a pharmacy model,” he said. “The BPG does a great job but it does have a party atmosphere sometimes. We didn’t want that.”

The collective has distinguished itself with its glossy collection of collectable trading cards, each showcasing a separate strain of cannabis. Each card features a picture of a plump bud on the front and an explanation of its properties on the back. “Afghani Goo,” for example, “has a clear and relaxing effect from head to toe.”

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  • Wes

    I want one of those trading cards.