Berkeley Patients Group hit with $6 million tax debt

(Berkeleyside) The state Board of Equalization is contending that the Berkeley Patients Group, one of the oldest and largest medical cannabis dispensaries in California, owes $6 million in back taxes, Berkeleyside has learned.

The board claims that the dispensary on San Pablo Avenue did not pay taxes on the medical marijuana it sold from July 2004 to June 2007 and now owes $4.4 million in taxes and about $1.6 million in interest.

The charges come on the heels of a September 2010 ruling in which the Board of Equalization determined that another Berkeley cannabis collective, Patients Care Collective, had to pay $639,000 for back taxes it owed from January 1, 2005 to September 8, 2008 on the sales of cannabis and marijuana cookies.

The Berkeley Patients Group, which has about 13,000 members and serves 800 to 1,000 patients each day, is contesting the charges, according to Elisabeth Jewell, whose firm Aroner, Jewell, & Ellis advises BPG on governmental regulations. Until February 2007, the laws regarding the collection of taxes for the sale of cannabis were murky, which is why the BPG did not pay, she said.

“There is no allegation of malfeasance in terms of collecting a tax and not paying it,” said Jewell. “The Berkeley Patients Group contends it was not clear to them that they had to pay sales taxes on what they consider medicine.”

That seems a bit unfair, doesn’t it?  Going after people for back taxes they didn’t pay because the Board of Equalization hadn’t decided until 2007 to require people to pay those taxes.

Still, this isn’t the first instance of using tax law to go after the big dispensaries in California.  Harborside Health Center, also in the Bay Area and one of the other biggest dispensaries, is under investigation by the feds for tax violations concerning deductions for their business which the government contends cannot be deducted, since they contribute to an illegal federal activity.

Remember how they finally got Al Capone, the bootlegging gangster of Prohibition?  It was tax evasion (not to say BPG or HHC resemble Capone in word or deed or in any way but selling something the government has banned.)