CA dispensary wants tax payment labeled a ‘contribution’

The owner of a California medical marijuana grow and dispensary is proposing to pay $1.3 million in back taxes to the city of San Jose, but with a caveat – the money must be classified as a “contribution or collection of membership fees,” not as taxes.

David Armstrong, the owner of MediMarts in San Jose, hasn’t paid the city’s 10% business tax in four years, claiming that doing so would put him in violation of state and federal laws. Paying taxes would be tantamount to admitting that they sell marijuana, Armstrong and his lawyers told NBC Bay Area.

MediMarts’ lawyer argues the venture is a co-op and doesn’t sell marijuana. Rather, MediMarts’ members are co-owners who share the company’s cannabis among themselves. Members must possess a free membership to MediMarts, which requires proof of California residency and a doctor’s recommendation for medical marijuana.

The case raises questions about the treatment of MMJ co-ops in California and elsewhere.

Under the deal he has floated to San Jose officials, Armstrong also wants MediMarts to be exempt from city inspections.

“Our position is that if the tax were worded differently – if it were for different reasons – then there’s no problem,” Dania Alvarenga, a lawyer for MediMarts, told NBC Bay Area. “This has the word ‘sales’ is in there. The word ‘business’ is in there, so it’s a matter of characterization and a matter of what it’s for.”

San Jose officials haven’t accepted or rejected MediMarts’ offer but said the proposal was risky because it might seem as if the city was allowing the dispensary to play by different rules than other dispensaries.

9 comments on “CA dispensary wants tax payment labeled a ‘contribution’
  1. Dave Armstrong on

    Ok folks let me clear up the facts and the truth in this matter again. MediMarts is a “collective” not a for-profit corporation that isn’t allowed by current state law. Secondly the City’s “controlled substance” business tax cause that’s what marijuana is was 7% for at least half of the time that has transpired and 10% the rest of the time. Just so everyone knows and understands where and why the problem originated I’ll explain that Prop. 215 was never written or intended to blatantly fly in the face of federal law (CSA) which is why ONLY “collectives” or “cooperatives” are allowed to be in the marijuana business in California. These two entities are equally owned by ALL members for a reason, one is so NO transfer of ownership would occur when a “controlled substance” and US currency exchange hands because NO one can “sell” marijuana according to state and federal law. Furthermore, because these entities are equally owned there can be NO “profit” in order to comply with both state and federal law. What happen when political lawmakers and lawyers put their greedy minds together was and is still today a travest of justice. The codified Prop. 215 with the poorly written SB 420 and purposefully didn’t specifically say that you CAN or CAN’T “sell” or “profit” from the controlled substance marijuana or the transactions. Why you might ask yourself, it’s simply folks because it is lawful to “tax” which is “profiteering” themselves from illegal business activities such as “sales” from unlawful businesses. Yes, it’s that sad my friends and it’s all about the money. This is how California has taken the “Compassionate Use Act” and turned it into the “Cash in on our Use Act” and made it a cash cow for state and local government. It’s also the very reason law makers are trying to take a voter initiative (Prop. 215) and first turn it upside down themselves unlawfully and now with Prop. 64 misguide and mislead the people of California once again and say the voters approve “selling” and “profiting” a controlled substance irregardless of federal law that explicitly prohibits such. Lastly, MediMarts has never been opposed to contributing funds to state and local government to administrate and enforce much needed regulations and standards but it has to be done properly and lawfully from the bottom up. In closing I’d also like to point out that since we were never given permission to pay a tax that proports a “sale” transpired when marijuana was exchanged amongst our members we never collected something that would have meant asking for forgiveness. So to make a long story short, either the City takes the offer and contribution of funds by allowing us to stay open and operate or it gets absolutely nothing if they close us down and don’t allow us to continue doing business.

    Sincerely Concerned,

    Dave Armstrong
    Managing Member of MediMarts
    A Closed-Loop California Collective

    For more info: CannabisCrisis.com

    Reply
  2. Brian Wilson on

    City of San Jose will not for one minute allow you to remain open if for no other reason ……. the other (16) collectives would never allow it and they’d have a riot on their hands. The city doesn’t care about your money Dave ……… and like Dave Hodges ……… your going away is the prize at the end of the day. I applaud the effort but your cause is a lost one and it’s yesterday’s news. My advice to you is start up again somewhere else in this state ………… do it the right way, get a license, start paying taxes and continue to make a ton of cash off of it.. like you have been for quite some time.

    Reply
    • Dave Armstrong on

      Brian,
      You obviously don’t understand or know the law and if you look up these so-called good actors business entities with the Secretary of State you’d see they are anything but a “collective” or “cooperative”! Just because the City has formed its own drug cartel by blatantly allowing illegal corporate entities to operate and hold themselves out to be something they aren’t (collectives) simply so the City can collect money from their unlawful business transactions is the problem. You must be part of that group trying to hide your illegal middleman dispensary business model who thinks paying money to the City makes you legal. Your comment about going away being a prize at the end of the day just affirms your self interest and ignorance to what the current law says and how it’s supposed to be being followed. We have a license, we pay taxes (payroll, income, etc) that are not related to “selling” the controlled substance marijuana in exchange for US currency because that violated both state and federal law. Anyone doing so is admitting to “selling” a controlled substance and money laundering simply by doing so. The state will not come to your aid when the IRS comes knocking at your door and prosecuted you civilly and maybe even criminally and they use the fact that you paid “sales” taxes or the City’s controlled substance tax as well. Lastly, you must not read up on the situation very much because we are not against contributing funds to state and local government to administrate and enforce much needed oversight of this market. It’s how and what they’re basing the funds they want on and from that’s wrong Brian. I highly suggest you do some well needed research before you make statements that simply aren’t factual and that could be considered defamatory in nature or you may have to pay for your ignorant remarks. Let me make this as easy as I can for you to understand, current state law only allows two entities to be in the marijuana marketplace. Either a true “collective” or a true “cooperative” nothing else is lawful and these two entities don’t make “sales” or “profit” for a reason. Selling and profiting from a controlled substance like marijuana is both a violation of state law and federal law. Prop. 215 was never meant to allow either or it would have flown in the face of federal law and these entities are “sales tax” exempt according to the SBOE themselves. You obviously don’t get it and just because you’ve followed the ship of fools thinking I’ll just do what I’m told and what everyone else is doing illegally that your protected and right in this matter. Well I have news for you Brian, we are not going anywhere anytime soon except to federal court so Uncle Sam can explain the Constitution and the “federal supremacy clause” to you and the states and city’s who think the federal government will continue to allow the “grey market” cartels formed by these state and city laws to profit from pot!

      Sincerely Concerned,

      Dave Armstrong
      Managing Member of MediMarts
      A Closed-Loop California Collective

      For more info see: CannabisCrisis.com and watch the video “why you MUST be a collective or cooperative”

      Reply
        • Dave Armstrong on

          Brian,

          Admitting to diversion is not a good thing my friend. When you say “them” that would mean more than one entity at any one given time or grow. Yes, you can grow for one “collective” or “cooperative” at a time as long as you had an agreement with that entity prior to growing hundreds of extra pounds or any amount that would exceed your personal needs. This is why we have the changes on our doorstep today, the I’ll just grow a boat load of weed and “sell” it wherever and to whomever I can is to blame on the Harborside vendor model that created this fiasco. Just come on in with your extra pounds of weed, we’ll test it, mark it up 300-400% and then “sell” it on consignment and piece meal you the payments. I have NO problem with a grower and a true “collective” doing things the right way but it’s become common place to do exactly what Harborside does or did and what your doing. Know this much though Brian, if Prop. 64 passes your livelihood and dispensary customers will diminish or simply disappear. Oh and if you’re supplying San Jose dispensaries then you have everything to do with them. They can’t survive or thrive without people like you growing more than your supposed to unless you have permission from ONE entity at a time. Just so you know and I’m just say’in Brian becareful what you wish for (Prop. 64) my friend it could be your last wish in the marijuana marketplace.

          DankDave.com

          Dave Armstrong
          Managing Member of MediMarts
          A Closed-Loop California Collective

          Reply
  3. Steve W on

    I’d be interested to know where the “profits” go for this “collective”?

    If the managers of MediMart are pocketing this “non profits” excess cash then it can’t very well be viewed as much of a true collective now can it?
    Some of these large dispensaries have, what most entities would characterize as profits, of millions of dollars per year. Whose pockets does this end up in?

    Reply
    • Dave Armstrong on

      Steve,
      Just so your aware of the facts I’ll take a minute and inform you of them. Everything must go back into the “collective” in one way or another Steve. MediMarts is like the Green Bay Packers of the non-profit NFL, each seat owner is part owner of the team or collective in this case. Yes, the people who run the team have salaries and the players who make the team what it is get paid rather well also. It has taken many years to build our vertically integrated system because NO investors can make a contribution and expect a return on their investment because that would indicate a “profit” occurred. We have built our entire organization literally from the ground up and we continue to put every dime back into our infrastructure and continue making our process better and bigger. We have lowered our equitable contribution amount consistently over the last few years so our members get the highest quality medicine for the lowest contribution amount in the marketplace today. Which is another reason the unlawful middleman corporate entities don’t like us, they simply can’t compete with our quality and pricing because there’s NO middlemen. We’ve also given pay raises consistently over the past few years to those who (players) help make it all happen and yes I have a $100k + salary for managing (coach) the team but we don’t make a profit. We file and pay our taxes every year and unlike most we pay payroll taxes every month to the state and federal government. When we buy supplies and products that we use in our process we also pay sales taxes like everyone else so I truly hope someday people will know and understand the laws as they read today and figure out that the state and city’s are trying to turn the “Compassionate Use Act”‘upside down and cover up their wrong doing by “Cashing in on our Use”! If you have any more questions id be more than glad to discuss or debate them with you and I will not give up or five in until a federal judge says it’s okay to “sell” and “profiteer” from pot!

      Sincerely Concerned,

      Dave Armstrong
      Managing Member of MediMarts
      A Closed-Loop California Collective

      For more info see: CannabisCrisis.com and watch the video “why you MUST be a collective or cooperative”!

      Reply
  4. Dave Armstrong on

    It’s not about being exempt from inspections folks it’s about violating Constitutional civil rights and illegal search and seizures. Just another spin our warped media takes to make the good guy look like the bad guy and to coverup the wrong doings of local government. Why would anyone give up their civil rights to prevent unlawful searches and seizures simply so they could continue to operate? Unless their operations are illegal which is the case in San Jose where entities NOT allowed by current state law have been authorized to do illegal “sales” giving the City the ability to “tax” the unlawful business. The City doesn’t like it when someone who knows, understands and is following the laws to the “T” points out their illegal doings and ways so they try and destroy that person and business rather than admitting their guilt and wrong doings! That’s San Jose and its local government at its finest, Councilmembers will pay for their blatant misuse of power and the truth will prevail! I vow never to give up or stop fighting for those who don’t know or understand what’s truly going on here in San Jose and across California!

    Dave Armstrong
    Managing Member of MediMarts
    A Closed-Loop California Collective

    For more info see: CannabisCrisis.com

    Reply
  5. Rene on

    As a member of this collective, where could we access any and all financial statements? As a shareholder in the collective, do we have a say where our money is used? Can I make a owner’s draw so I can donate into the collective and receive my medicine? I think the meaning or spirit of the law is always up to debate depending on one’s views, but the ultimate decision makers are the public, even as ignorant as we all wished we weren’t.

    Reply

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