What’s Next for Berkeley Patients Group?

Berkeley's largest pot club is in no danger of closing despite its $6.3 million tax bill.

Owners of Berkeley’s biggest medical marijuana dispensary, Berkeley Patients Group, are hoping for a settlement behind closed doors on a $6.3 million tax bill. The three-year-old tax case drew fresh headlines recently when the California Board of Equalization issued a press release reiterating the board’s stance on the dispensary’s tax problems.

However, Berkeley Patients Group’s operations have not been affected by the tax dispute and the club is not in danger of closing, said spokesman Brad Senesac. The dispensary just opened up a new space for patient services.

The dispensary’s tax bill comes from sales of medical cannabis from 2004 to 2007. The board of equalization ruled that medical pot sales were taxable in 2007. Board Chairman Jerome E. Horton said that pot sales are retroactively taxable and that Berkeley Patients Group owes for those years.

Stephen DeAngelo, owner of Harborside Health Center in Oakland, endured a similar situation. He said the Board of Equalization told Harborside that pot was not taxable, then later came back and said it was, and Harborside owed $110,000 in back taxes. Harborside paid them.

The board’s decision to slap Berkeley Patients Group with a huge bill for back taxes stems from a larger movement to collect more taxes from pot clubs, and even street dealers. The board now holds that all weed sales, medical or otherwise, are taxable and the board intends to collect. The board has audited forty clubs, and suspects five hundred out of an estimated eight hundred in the state are not paying sales taxes. Horton has also backed the newly introduced Senate Bill 626, which would tax and regulate pot like tobacco for the first time.

Drugs Decriminalized in the Budget?

The State of California is so broke it might not be able to afford parts of its drug war anymore. Criminal laws are on the books, but funds for mandatory diversion into treatment are no longer available, meaning convicted drug offenders might have an out.

While numerous laws detail criminal penalties for drug possession, Proposition 36, enacted by 61 percent of voters in November 2000, says first- and second-time offenders for simple, non-violent drug possession must get substance-abuse treatment instead of jail time.

But Prop 36 funds have dried up. The state allocated $120 million per year for the first five years, set aside $108 million in 2008-2009, and $18 million in 2009-2010. Governor Jerry Brown‘s budget includes no money for it in 2011-2012, said Lanny Swerdlow, a dispensary owner and activist in San Bernardino County. “The coffers are empty, so it’s a mandate with no money, but a mandate nonetheless,” he said. But “someone who’s eligible and demands treatment can’t just be sent to jail.”

Testing the Weed Testers, Cont.

Last month, we reported that none of the so-called medical cannabis laboratories testing local supplies for potency and safety have passed an independent, third-party audit — which is necessary to prove lab validity in the real lab world. To that end, several mainstream scientists had formed the Alliance for Cannabis Science, based in Montana, to voluntarily provide such audits.

Now, the alliance has a peer. On March 1, two Oakland labs, Steep Hill and CW Analytical, said they were forming the Association of California Cannabis Laboratories in Oakland, “to address the growing need for standardization in the cannabis quality-assurance industry.” The two labs met with representatives from a third lab, Pure Analytics, “to discuss policies and technologies in the evolving industry.”

“The more we standardize our protocols, the more we truly serve our industry and the patient community,” said Dr. Robert Martin, co-founder of CW Analytical.

“The mission of the organization is to promote sensible and consistent testing methodology between the labs, and to act!” the group said in a press release. The group will provide a forum for inter-lab communication and conflict resolution.

David Lampach, co-founder of Steep Hill and an amateur chemist, said, “We are honored and excited to sit down with our colleagues in a spirit of cooperation to encourage the betterment of our industry as a whole.”

Still, all unaudited lab data is suspect, said Debby Goldsberry, head of Berkeley Patients Group, at a conference for NORML, the National Organization for the Reform of Marijuana Laws. “Anybody can open their doors and say, ‘We test cannabis.’ What does that even mean?”

“There is no real lab out there that’s doing good testing,” said Senesac of Berkeley Patients Group. “There’s no standards. I just don’t think we have good labs out there yet.”

Los Angeles Lotto Time

Some 229 Los Angeles medical marijuana dispensaries have made the deadline to join the city’s pot club permit lottery. One hundred clubs will randomly win a permit to serve the estimated three million citizens in the city. Critics note that a lottery — as opposed to a merit-based system — all but ensures some irresponsible owners will get a coveted permit. Los Angeles also plans to tax medical marijuana sales at 5 percent on top of the state sales tax of 8.75 percent. The tax went before voters Tuesday. The city has taken fifteen years to regulate local clubs, and while city leaders dithered, unregulated clubs proliferated, creating violence and making Los Angeles the poster child for opponents of medical marijuana nationwide.

Correction: an earlier version of this story mis-stated the amount Harborside Health Center paid in back taxes to the State Board of Equalization.


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