Vail Law: Is medical marijuana subject to sales tax?
Vail, CO, Colorado
My column last week on Colorado’s medical marijuana laws generated lots of comment. Apparently medical marijuana use is a smokin’ hot topic here in Happy Valley.
A couple of things that flowed from the column were whether medical marijuana dispensaries may be taxed and who determines if the relationship between the doctor prescribing medical marijuana and the patient is, in fact, genuine.
The second question first. As discussed in the prior column, not every Tom, Dick and Tokin’ Harry can legally obtain marijuana for medical use. Rather, the use must be for a bona fide “debilitating” medical condition and a licensed physician must certify that the patient’s symptoms may “reasonably” be ameliorated by the use of marijuana.
If all statutory criteria are met, the patient may then obtain an identification card issued by the state, entitling the holder to obtain and use marijuana medicinally. If either the patient or the doctor acted fraudulently or for purposes other than acquiring, possessing, manufacturing, using, distributing or selling marijuana for any reason other than its legitimate medical use, either one or both of them may be criminally charged and prosecuted.
The state agency that administers the medical marijuana program is the Colorado Department of Public Health and Environment. The Medical Marijuana Registry subdivision of the department processes medical marijuana applications, including physician certifications. The doctor must detail a patient’s medical condition and certify both that the patient will “benefit from the use of medical marijuana” and that the patient and physician have a “bona fide physician-patient relationship.” The application and doctor certification are processed by the department.
If the information provided is determined to have been falsified, enforcement and eventual prosecution lies with the usual law enforcement agencies. Accordingly, the first step in determining the validity of the doctor-patient relationship lies with the physician himself when he certifies the same as true. The second step lies with the Department of Public Health in verifying the accuracy of the information provided, including the doctor certification. Only if the information provided is false, do law enforcement, and ultimately the courts, become involved.
As to the question of whether medical marijuana dispensaries may be taxed, the answer is no – and yes. Frankly, it’s unclear. While prescription drugs are exempt from state sales tax, marijuana is considered, at least by some, to be an herbal supplement – like echinacea, for instance.
While medical marijuana is obtained via a prescription, what its taxability teeters on is, apparently, whether it is a “drug” or simply a “supplement.” But if it’s a “supplement,” why would a doctor’s prescription be required? If, instead, medical marijuana may properly be considered an herbal supplement rather than a “drug,” then it should not be exempt and, instead, should be subject to sales tax.
State regulations define a prescription as “any order in writing dated and signed by a practitioner… specifying the name and address of the person for whom a medicine, drug or poison is to be offered, and directions, if any, to be placed on the label.” Medical marijuana, however – at least for now – is not available at your neighborhood pharmacy. Instead, under Colorado’s medical marijuana laws, it is available to be grown or from an authorized “care giver,” under which category medical marijuana dispensaries exist.
But, state regulations also state, “any time a question exists as to whether a sale is taxable or exempt, the law requires that the vendor charge the sales tax and the purchaser pay the tax.” Sheesh!
Although the medical marijuana law was enacted in 2000, only recently have medical marijuana dispensaries begun to emerge from under ground. As such, this budding industry is still in many respects largely unregulated. As a result, some municipalities are beginning to regulate dispensaries on their own and establish how they should be run. Included in these rules and regulations may be provisions imposing municipal sales taxes, which has already happened in Boulder and Frisco.
With approximately 13,000 users of medical marijuana statewide and the numbers growing, some sense will need to be made of all this. A little direction from the legislature would likely be a welcome salve.
Rohn K. Robbins is an attorney licensed before the Bars of Colorado and California who practices in the Vail Valley. He is a former adjunct professor of law and may be heard on Wednesday nights at 7 p.m. on KZYR radio (97.7 FM) as host of “Community Focus.” Robbins may be reached at 970-926-4461 or at email@example.com