Berkeley Patients Group owes $6.4 million in back taxes

Cannabis plants for sale at BPG. Photo: Frances Dinkelspiel.

Berkeley Patients Group (BPG), the city’s largest medical marijuana dispensary, owes more than $6.4 million in back taxes and interest, according to the state’s Board of Equalization (BOE). The BOE confirmed their original assessment of taxes at its meeting in Sacramento this week. Berkeleyside revealed the tax dispute earlier this month.

Elisabeth Jewel, the lawyer lobbyist representing BPG in the case, told Berkeleyside that the group will apply to the BOE’s “offer in compromise” program. “There’s no way that Berkeley Patients Group can pay $6 million in taxes,” she said. “The purpose of the offer in compromise program is to come up with a plan that keeps a taxpayer in business.”

Jewel said that the BOE made clear in its hearing this week that it wanted to find a way to keep BPG solvent. The BPG application will be made soon, according to Jewel.

BPG had claimed that its sales were classified as medicine and therefore exempt from sales tax. The BOE ruled that medical marijuana sales did not meet the definition of sale of an exempt medicine. As a result of the ruling, BPG is liable for sales tax payments from 2004 to the present for its sales of medical marijuana.

The BOE audited BPG for the period July 1, 2004 through June 30, 2007, and found that BPG owed more than $6.4 million in tax and interest. BPG has been paying sales tax on its sales since 2007, when the BOE clarified a previously ambiguous taxation regime.

At this week’s meeting, the BOE also affirmed that sellers of marijuana must hold a seller’s permit and are required to file and pay sales tax. Persons who make sales without a seller’s permit are subject to an eight-year look-back period for taxes, penalties and interest.

Jerome Horton, BOE chairman, also is proposing legislation to regulate the distribution of marijuana from growers to retailers as a way of controlling illegal sales and assessing tax. “The time is overdue for the state to provide leadership for this industry regarding the manufacturing and sale of marijuana similar to what we did for cigarettes and liquor,” Horton said. “Such proposed controls will have the same effect of regulating and controlling sales and capturing the appropriate sales tax.”

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  • Daniel M.

    Penalizing BPG because the BOE was unwilling to clarify their stance on Medical Marijuana is practically criminal. It looks like the State Government is just trying to shut down BPG.

  • Tor

    Paying taxes is not a penalty. It’s the price of civilization. The article specifically states, “Jewel said that the BOE made clear in its hearing this week that it wanted to find a way to keep BPG solvent. ” BOE’s Horton goes on to point out that BOE is explicitly working to normalize tax collection procedures for medical marijuana sellers.

  • john holland

    so would that mean bpg has done about $60 million in gross sales in that time? any local business owners care to improve my math? just curious.

  • Bruce Love

    @John, I guesstimated in an ealier thread.

    http://www.berkeleyside.com/2011/02/03/berkeley-cannabis-collectives-slapped-with-huge-tax-bills/comment-page-1/#comment-20166

    Don’t forget that the $6.4M includes a heck of a lot of interest you need to not consider when estimating corresponding revenues. Also, I think my guesstimations in that earlier post are better than nothing but I wouldn’t put too much stake in them.

  • Daniel M.

    BPG should not have to pay taxes on their sales no matter what the BOE says. It may have been their responsibility to **COLLECT** sales taxes, but it is the consumers who are responsible for paying them. The reason they were not collected is because the BOE refused to clarify their rules about taxation on medical marijuana. This entire situation is BOE’s own fault and it is insane for them to go after BPG because they didn’t do their due diligence in making their own rules clear.

  • David Crocket

    Best of all: The people behind BPG supported Prop 19, the Tax and Regulate Initiative!! Live by the sword, die by the sword!! Pay Up dudes!!!

  • John L

    lets face it, they’re making nice money. Its the cost of business, why rock the boat. No one is knocking at the door. You think you might like to keep it that way. Greed could become there downfall…

  • Paul Revere

    No taxation without representation!

  • Ghostlanterns

    Down with cut throat capitalists like Bpg, whose compassion has swiftly diminished since changing themselves from a not for profit to a b corp, killed their hospice program, cut employee benefits, cut patient benefits, actively tried to shut down competition, and has more civil lawsuits from ex employees than any other bay area dispensary. Passionate and beautiful staff, run by white collar criminals, its truly sad.

  • Nolasusan

    Seriously, BPG got greedy. Greed is not good. First rule of any business: pay your taxes, pay even more taxes than the State wants. That would have kept them in business. They cut off their nose to spite their face. Made their bed, now lie in it. Stupid business practices = out of business. Wise up guys. Ya’ll made enough money to pay the sales tax. Just damn greedy bastards.

  • Nolasusan

    Seriously, BPG got greedy. Greed is not good. First rule of any business: pay your taxes, pay even more taxes than the State wants. That would have kept them in business. They cut off their nose to spite their face. Made their bed, now lie in it. Stupid business practices = out of business. Wise up guys. Ya’ll made enough money to pay the sales tax. Just damn greedy bastards.

  • Nolasusan

    My sentiments exactly. Thanks for putting it into words I could not.

  • Nolasusan

    My sentiments exactly. Thanks for putting it into words I could not.