CA dispensary promises court fight over $767K tax ruling

A California district court has ruled that Medimarts dispensary in San Jose must pay the city $767,058 in taxes and late fees, but the owner says the municipality’s not getting a dime.

Medimarts president David Armstrong says his group is a collective where members are co-owners who don’t buy marijuana, but rather make an “equitable contribution” toward the marijuana that is grown, NBC Bay Area reported.

“My next step is do whatever it takes to maintain my caregiver status for the 10,000 plus, active medical marijuana patients that we serve,” Armstrong told the NBC news station. “We all have equal rights to the medicine we make. So when you come in and pick up your medicine, there’s no transfer of ownership. Hence there’s no sale.”

Based on that reasoning, Medimarts has not paid the Marijuana Business Tax to the city of San Jose since May of 2012, according to the July 21 court filing.

Armstrong and his lawyers plan to appeal.

The battle goes back to December 2014 when the city sued Medimarts for non-payment of the tax. Medimarts countered with an injunction to stop the city from closing the business.

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3 comments on “CA dispensary promises court fight over $767K tax ruling
  1. seesoclearly on

    Paying taxes is what is going to make a license friendly relationship with us that want to be licensed in CA and the CA gov and locals. Remember that many locals have initiated ordinances against anything Cannabis related. A new tax base will relax these restrictions and we need a local license to apply to CA when the time comes. Not paying just makes the gov pucker up and will mess it up for the many small businesses that want to pay their fair share and operate legally, in CA anyway. If the industry is not careful, the gov will be awarding only 5% to 10% of applicants like in other states and you know it aint gonna be the little honest grower or dispenser that will get a license.

  2. Dave Armstrong on

    Asking for permission rather than forgiveness, when current state law and federal law don’t allow for the “sale” or “profiteering” from marijuana how can the state collect taxes (revenue)? There are people in prison today simply because they paid “sales” tax on controlled substance transactions. Don’t get me wrong folks we are not against contributing funds to governmental entities to administrate and enforce much needed rules and regulations of this industry but it doesn’t have to directly involve the exchange of cannabis for medical or recreational purposes. We proposed a method that is more lawful and protects not only the individuals who uses marijuana for whatever reason but also state and local governments from putting these people and themselves at risk from potential prosecution. Each individual person should be signing off and agreeing to contribute funds to state and local government so they can better police and protect or industry. An annual contribution made by every user to state and local coffers will suffice the greedy governmental entities and give them the money to do the job they need to get done. This Court decision has a silver lining folks, it says individuals are not liable to pay a tax on marijuana because it is a controlled substance and an individual would be implicating themselves to violating both current state and federal laws. California law currently only recognizes two entities that can legally operate a marijuana business, a “collective” which is hundreds if not thousands of individuals just like myself and a “cooperative” which is the only form of a corporation that can operate lawfully in California. The majority of entities doing business in California are illegal ones which gives state and local government the right to tax the unlawful business activities. It’s the classic “bait and switch” tactic used for hundreds of years by business and governments simply to make and generate “profit” through over exorbitant taxation in this case. The ruling says one thing (no individual liability) and then tries to accomplish another (establish liability) which it can’t do and doesn’t make any sense unless California is trying to hide the fact that they’ve been fleecing medical marijuana patients here for many years. California is trying to change (turn it upside down) current state law (voter proposition) so that “sales” and “profiteering” from pot will actually become state law. California has turned the “Compassionate Use Act” (Prop. 215) into the “Cash in on Our Use Act” simply by misleading and misguiding us into forming entities that current state laws do not allow in order to collect revenue through taxation. So you see folks the beauty of the ruling is the fact that a “collective” is in essence a partnership and association formed by individuals all of which have the same 5th Amendment right as me (Dave Armstrong) so not only am I dismissed from the liability of a tax specifically tailored to the controlled substance marijuana but so are all the other members of the “collective”! The corporation (MediMarts) was only formed to oversee the day to day operations of the “collective” itself as suggested by the AG Guidelines and what the SBOE proports the businesses in the industry to do rather than telling people the truth that only two types of entities are lawful and they are supposed to be “tax exempt” so no “sale” or “profit” occur when doing business in the marijuana industry. Once we understood all of this and once the management corporation was unable to have a bank account the corporation was dissolved except for the fact that it remains in litigation. So you see the ending of this story is a triumph for ALL of us who wish to protect ourselves from potential prosecution and ten years to life in prison like many others before. The state of California and local municipalities need to protect us not throw us towards potential slaughter from the DOJ, DEA and the IRS while they sit back free from the potential of prosecution or they’d be doing this all themselves. You can’t squeeze blood out of a turnip and you collect money from an entity that doesn’t truly exist anymore and has no assets or money and one formed only because of the state’s erroneous guidance. Simply ask the SBOE for a list of all the lawful “tax exempt”‘entities that should have been operating legally here in the state since SB 420 codified Prop. 215 and you’ll find what I found, there are none! If everyone can’t see the writing on the wall and smell the cannabis conundrum created by our own government and its leaders simply to make money and fulfill there greedy desire to fill their coffers with cash from cannabis users! This isn’t over by any means folks and it’s the beginning of what truly needs to occur and happen in order for individuals and this industry to thrive and survive. Uncle Sam needs to remove marijuana from the controlled substance act like alcohol and tobacco if they truly want to sin tax a medicine given to us and put on our planet by God! Prescribed medicine is not taxed and neither is produce my friends so which is it (marijuana) a number one cash crop or a natural medicine that makes us feel better and think more open minded? We need to fix this 40 + year old problem once and for ALL from the “top down” not the “bottom up” so we can all go about our business and contribute taxes to our flip flop governments.

    Sincerely Concerned,

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

  3. Shane on

    Its operators of cannabis business’ like this that prevent legalization from progressing. If they want to live in that world that’s they’re choice but they should not use the guise of a legal cannabis business as that does nothing but make all the good operators job harder.

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