MMJ Tax Hike Needed in San Jose to Fund Referendum, Mayor Says

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Dispensary owners in San Jose, Calif., recently banded together to fight tough new medical pot regulations in the city, hoping to force a referendum on the issue.

Little did they know it might cost them dearly from a financial perspective.

The owners, who formed a group called Citizens Coalition for Patient Care, collected and submitted nearly 49,000 signatures supporting a repeal of the new laws. Now they just need to wait until election officials confirm there are enough valid signatures to get the issue on next year’s ballot. It seems seems like a forgone conclusion that will happen at this point, given that the group needs just 29,653 signatures to qualify a referendum.

But San Jose Mayor Chuck Reed took the wind out of the group’s sails this week, saying he wants to temporarily raise the 7 percent tax on medical cannabis centers to 10 percent to cover the estimated $1 million price tag for a referendum. Reed wants City Council to vote on the proposed tax hike – which would last one year before reverting back to 7 percent – in January. If the mayor gets his way, the 100 or so pot dispensaries in San Jose might have to pony up an average of $10,000 each in extra taxes just to fund the referendum, and there’s no guarantee voters will back a repeal.

As one would expect, San Jose medical marijuana businesses aren’t too happy with the mayor’s proposal. They were hoping that gaining enough signatures would convince City Council members to work with industry leaders to tweak the regulations, rather than lead to an actual referendum. It’s still possible the two sides can work together, and of course City Council could simply vote to repeal the laws on its own. But both of those scenarios are unlikely given the mayor’s belief that the MMJ industry has grown out of control in San Jose.

In September, the city adopted new rules that will cut the number of dispensaries from 100 currently to just 10 and force MMCs to cultivate marijuana themselves rather than buy it from third-party growers. The laws also relegate dispensaries to certain areas of the city. MMC owners argue that the new rules will make them targets for federal prosecutors, as they’ll have to grow marijuana on site.