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.”