Los Angeles – With legal recreational marijuana coming to California in January 2018, Los Angeles City Controller Ron Galperin released a map showing the status of medical marijuana dispensaries in the City, along with suggestions on how to better ensure that the businesses pay taxes and comply with local regulations intended to protect residents and customers.
As a next step, the Department of City Planning will be releasing draft regulations to regulate the locations of marijuana businesses under Proposition M, which L.A. voters approved in March to regulate and tax the industry. These land-use requirements are expected to be released within a week and will help inform enforcement efforts.
The City Controller’s map, online at lacontroller.org/marijuana, shows marijuana dispensaries operating in the City of Los Angeles with current Business Tax Registration Certificates (BTRC), those who once held a BTRC, and those that have been the subject of actions by the Los Angeles City Attorney’s Office.
While some estimates exceed 1,700 operational marijuana dispensaries in Los Angeles, the Controller found 756 held Certificates in 2016 -- not all paying taxes. With new updated requirements from the Office of Finance, which included the requirement of a signed affidavit, just 139 obtained valid Certificates in 2017 deemed to be in compliance with L.A.’s tax regulations. The map also shows 563 dispensaries against which the L.A. City Attorney’s Office has filed criminal cases.
A new website unveiled by the City Controller notes that economists with marijuana industry experience estimate that first-year retail sales in the City of Los Angeles for both medical marijuana and newly legalized recreational marijuana could approach $700 million -- inclusive of indoor commercial cultivators, transporters, manufacturers of marijuana-based products such as edibles, and testing laboratories. Based on Measure M’s business tax of up to 10% of gross receipts on recreational sales and up to 5% on medical sales, the City would be entitled to collect at least $50 million in new tax revenues from retail sales in 2018.
“Too many dispensaries represent themselves as being legally compliant, but we know that’s not the case,” Controller Galperin said. “Businesses that ignore the rules and don’t pay taxes should be shut down, and people should not be buying from them.”
In a letter to the Mayor and City Council, Galperin expressed concern that many dispensaries cannot be counted on to report their gross receipts accurately, based on the City’s experience with the medical marijuana industry, which has operated for more than a decade. The Controller advised policymakers to require controls such as employee background checks, security cameras and cash-counting devices. He also advocated measures to help dispensaries gain access to federally regulated banks, and to help the City gain access to information expected to be compiled by state regulators from an inventory control system to track each legally cultivated marijuana plant.
“When making decisions on where to buy, people should consider which businesses are complying with the law and which aren’t, and which are paying taxes and which aren’t,” Controller Galperin said. “We are putting information in the hands of both potential buyers and neighbors of these businesses, who deserve to know whether they are operating legally and how to report any negative impacts on neighborhoods. We need enforcement tools to ensure that these dispensaries are being responsible members of their communities.”
California voters approved recreational marijuana sales for adults 21 and older in November 2016, with legal use beginning in January 2018. In March 2017, Los Angeles voters approved a regulatory framework for the businesses, including taxes on gross receipts. The ballot measure allows the City Council to tax medical cannabis sales at up to a 5 percent rate, down from the current 6 percent; recreational cannabis at up to 10 percent; and 1 percent to 2 percent for companies that cultivate, research and transport marijuana and currently pay no City taxes.
In 2013, L.A. voters approved Proposition D to establish a cap of 135 medical marijuana businesses that would have “limited immunity” from prosecution.