Medical Marijuana Tax Plan and State Structuring

by Mark

Finally Someone Wrote It Down!

Have you ever heard someone say, “They (the government) should just legalize and tax marijuana!”

Well, I have. So I started to look at the tax plans in the states that have medical marijuana laws to see what they had.

For the most part, there is not one solid plan among them.

Some say that “It’s medicine and you can’t tax medicine.” This is true. However, a pharmacist is not distributing medical marijuana; it is being treated as a con-trolled, over-the-counter medication. Therefore, it can be taxed on the med-ication aspect just like aspirin, not to mention the plant’s origin is consid-ered an herb, and herbs can be a taxed product also.

Hello. Allow me to introduce myself. My name is Mark. I am a carpenter by trade and I have been following the medical marijuana laws since 1996. When California passed Proposition 215, it was ground-breaking legisla-tion. Now in 2011, we have 15 states that have legislation on medical mari-juana and a handful of states with leg-islation in the works. All of them have one thing in common: not one has been able to figure out the best way to set up the business end of medical marijuana! Well, I have taken the time to write a detailed plan of how, I think, to properly run this industry and produce the most tax revenue to the benefit of everyone.

This document started as an idea dis-cussed over a game of cribbage. Then 20 people put in their input and suggestions, and most suggestions were implemented in this idea because each one addressed a past, current, or future concern. The use of medical marijuana should be a constitutional right because it directly coincides with the pursuit of happiness.

This idea outlines the safest, most eco-nomical way for patients to acquire a quality product that has met mini-mum standards and guidelines at the most competitive price available. This way, patients will know that the med-icine that they are putting into their already illness-struck bodies has met guidelines to guarantee effectiveness and safety. The following plan will outline my thoughts on how any state can make the next groundbreaking legislation. I have taken ideas from all over and put them into what has become a sensible and simple way to regulate the business of medical mari-juana, by explaining every aspect, from licensing to inspections, law enforcement, commercial growers, patients, dispensaries, the relief on the judicial system, and, most important, to create a whole new tax base.

This idea is not going to be all that dif-ficult to accomplish if the structure of the outline is followed. I feel that the total expense, including all licensing costs, insurance costs, employment costs, income and sales taxes, business expenses, and growing costs, will all be able to be achieved for approxi-mately $10 per gram or less. Right now, market prices are dictated by the black market, and patients are paying between $14.29 and $17.15 per gram. The immediate drop in the price will ease pressure on the pocketbooks of the ill.

This program may only have 10,000 patients in its first year. However, as time goes on, more people are going to get ill and will be able to benefit from medical marijuana. In 10 years, there may be 200,000 patients in a state that benefit from medical marijuana. This is all the more reason to implement this idea from the beginning and set it up with a good, solid foundation to build from.

In this outline, the dispensaries and commercial growers, who together are considered the caregivers, are expected to go above and beyond just their businesses. They should have to pro-vide pro-bono work, just like lawyers, to help the seriously ill. This could be showing patients how to grow their own; however, if patients are seriously ill, then odds are that they will need the usable product right now and not in four months. This could also be as simple as delivering patients’ medicine directly to them and possibly helping with administering the medicine, or charitably donating product to the county, to help provide to the individ-uals that are on a fixed income a way to get the medicine they need without having to find money they don’t have. This will instill a sense of integrity in this industry. This pro-bono clause should be part of the licensing require-ments. If applicants refuse to partici-pate with this clause, they will not qualify for the licensing.

These dispensaries will allow greater control of product quality, cost con-trol, and ultimately taxation of the product. In every industry, there are quality standards that have to be met. This industry should be no different. Some states designate a caregiver to grow the medical marijuana for the patients. The problem with this idea is that each caregiver can only take care of a few patients. Now, you may ask, what’s wrong with that? The problem with the designated caregiver laws is that, for example, in the state of Michigan, where there are 200,004 people who have been issued medical marijuana cards, the state will need 33,334 growers to take care of that many people. That is a lot of people to create quality medical marijuana. Another problem is that patients are stuck with caregivers; if they don’t know how to grow medical marijua-na, patients are not getting what they need. Patients can’t shop around for the best product or price. Not to men-tion, where is the sales tax?

What if a caregiver is two weeks from harvest and a mold issue wipes out the whole crop? All of the patients who

need this medicine, and have been waiting for three and a half months for the medicine, are now left with no alternative but to break the law to get their medicine. At the dispensary, patients can find what they need. That could be medical marijuana, pre-baked goods, cooking oils, or plant clones. The sales can be tracked and taxed at the dispensaries. They cannot be tracked with the caregiver legisla-tion. Another major downfall to the caregiver legislation is that the com-plete lack of competition allows the caregiver to price-gouge the patient. Patients can’t do anything about it because they have to designate the caregiver or do it themselves, although in some cases doing it themselves is next to impossible.

These dispensaries should be able to purchase from outside sources. This will allow the dispensaries the ability to obtain illness-specific strains from different sources. This will also allow the patients the chance to find the medicine that works the best for them. This will raise the quality control of something that is supposed to be of

Medical Marijuana Tax Plan

Medicinal grade; this means that it should hold a minimum THC or CBD count, and the product should not be full of growth chemicals. These crite-ria should be included in the law because medical has to hold some standards.

The purchasing by dispensaries from licensed commercial growers will also allow for the income paid to the com-mercial growers to be tracked and taxed as income, whereas the caregiv-er legislation has no possible way to track or tax medical marijuana. In this idea, a revolutionary new split tax payment is used. The trickle-down effect has proven to only work for the top of the pyramid. With the split tax, the money that is intended for a specif-ic destination is sent directly to that destination, without a delay or inter-ruption from the state. This split tax is designed to help immediately with the shortfalls that the trickle-down effect has created. This split tax will also greatly reduce the amount of time it will take to realize if someone is get-ting delinquent on taxes.

Properly regulating medical marijuana could potentially balance out our health care costs, or at least slow the increase of our premiums, by using less of the outrageously priced pre-scription medications, and if you have done any research you know that there are preventative benefits that cannabis provides to the human body. Because of this fact alone, the pharma-ceutical companies stand to lose a lot of money if this idea is passed.

However, there is nothing in this idea that states that the pharmaceutical companies are excluded from apply-ing for the licensing.

This is an industry, and it should be treated as such. We need to tax and regulate this industry, from its inception into the mainstream culture. There also need to be quality standards for medical marijuana. It should have a minimum percentage of the active ingredients THC or CBD. The plant should be flushed of all chemical fertilizers before it is harvested and consumed. The growers should have to have some knowledge of how plants grow. It’s not as easy as just sticking a seed in the ground and you end up with medical marijuana. Like any medical prescriptions, medical marijuana needs care and knowledge in order for the product to turn out properly.

You are always going to have people who break the law. Look at the cur-rent pharmaceutical pill abuse. That industry is regulated and there is still crime involved with it. But the indus-try is still allowed to operate without much opposition because it is the right thing to do for the people who need those types of medications. Just like in the pharmaceutical industry, if medical marijuana laws are being broken, then criminal charges should be brought forth and prosecuted.

In July 2010, the local, state, and federal government launched a raid in the forests in northeast Wisconsin. They found 50,000 plants that were being grown by the Mexican drug cartel. If you were to be conservative on the number, you are still looking at 12,000 pounds of cannabis. But the question that no one has asked is, “Why?” The answer to that is because there is a demand for it here. Let’s stop acting like it does not hap-pen here and properly address this situation; then we can stop funneling money to the cartel when we, as a country, need it more!

State

The government needs to create an office in the Department of Health Services to oversee commercial med-ical marijuana growers and medical marijuana dispensaries. For lack of a better name, I will call this depart-ment the Department of Medical Marijuana. This department will also oversee the operations of its county offices and will select the final review board. This office will be in charge of the licensing of dispensaries and com-mercial growers, budgeting its county branches, data recovery, and data analysis. The data recovered should be used to fine-tune this idea.

Data Recovery

It all starts with the central control computer that is controlled by the Department of Medical Marijuana. This computer will be linked to all of the licensed dispensaries. The central computer system will be designed to track information. Here’s how it works. On the back of the medical marijuana card* is a magnetic strip just like there is on a credit card. The dispensary counter will have a card scanner. Patients will swipe their issued medical card; their picture and their information (that is in the Department of Medical Marijuana’s computer) will come up on the dis-pensary’s computer screen. This will allow the dispensary clerk to verify that the patient has a valid medical marijuana card. The Department of Medical Marijuana will be able to monitor if patients are overbuying and possibly reselling illegally by using the data collected. It will also allow the Department of Medical Marijuana to monitor the marijuana purchases by the dispensaries, per-gram sales, plant sales, and all other related sales at each licensed dispen-sary. With proper guidelines, this should allow the Department of Medical Marijuana the ability to monitor the activity of all legal med-ical marijuana sales.

Commercial growers will also be issued a data card to track sales to the dispensaries. This will ensure that the proper income taxes will be paid, quality standards are met, and that the dispensaries are only purchasing from licensed commercial growers, eliminating the cartel’s ability to mar-ket their product here.

Patients will be issued a medical mar-ijuana card. The medical marijuana card will have photo identification, name, issuing county, and a magnetic strip on the back. The magnetic strip is for computer verification that the patient’s card is valid. This strip can also hold information as to a patient’s seller’s license*.

Licensing

The licensing fees should easily be able to pay for the creation and oper-ation of the Department of Medical Marijuana. All licenses will carry a fee, which per county will pay for the set-up and operation of the Department of Medical Marijuana. These fees will have no other finan-cial destination; if there is a fee sur-plus, save it. In the future, changes may have to happen. All commercial growers and dispensaries are to fol-low all building codes. All dispen-saries and commercial growers applying for a license will have to file their certificate of business liability insurance, provide an FEIN number, and agree to a pro-bono clause to qualify (2.5% of gross business for the previous year). All licenses are to be posted in plain sight, hanging in a frame. An individual’s criminal record should be evaluated by omit-ting all marijuana charges. I don’t feel that it is right to exclude individuals from getting the licensing if they are convicted felons only for growing marijuana or possession of parapher-nalia.

There should be a license limit per owner (two dispensary licenses per person). This is to prevent monopo-lizing of the industry. However, if the Department of Medical Marijuana does not receive enough applications to fill the allotted amount for the dis-pensary licenses, and it has addition-al licenses left, it can open the unfilled licenses up to the current license holders.

Dispensary licensing The license will state the business name, address, license holder’s name, the local inspector’s name, and con-tact information. The dispensary will pay a straight $1,000 licensing fee per year per location. As a requirement of licensing, all dispensaries will have to provide pro-bono work. The Department of Medical Marijuana should set a limit on the number of

dispensaries in one area; one dispensary per 1,000 people should be enough. The dispensary will have to have a point of sales computer that is linked to a central computer at the Department of Medical Marijuana. The licensing requires that when purchasing from commercial growers, the dispensary provide all information required (i.e. quantity purchased, active ingredient percentages, amount of money per gram paid to the grower, and grower identification card number) to the Department of Medical Marijuana database. Dispensaries will be able to cross-reference the grower with the central database to prevent accidentally purchasing illegal medical marijuana.

Commercial Growers

The license will state the business name, address, license holder’s name, the local inspector’s name and con-tact information, the square footage of the garden, and the maximum number of plants. The licensing department has the right to inspect an operation at any time when pro-viding proper identification. It will have the right to terminate the licens-ing if any laws are broken. All deci-sions will be final after a review board hears the case of the termina-tion of licensing. If the decision made by the county inspector to suspend licensing is overturned by the review board, it will be the responsibility of that county’s Department of Medical

Marijuana to reimburse the grower or dispensary for lost earnings during the down time. This will keep the inspectors honest, and will ensure that a solid case is to be presented to the review board. If a commercial grower wants to own a dispensary, it will have to apply for both licenses. The licensing of a commercial grow-er will be based off of the square footage that is used for growing med-ical marijuana* (planting stations, trimming, and drying areas are not included in the licensing square footage). Outdoor crops will require special licensing. All growing areas will have to have the ability to be locked and secured. Multiple licenses should be allowed on one parcel of land as long as they are in separate, secure structures, there are proper licenses to cover the square footage, the plant numbers are correct, and all of the other licensing requirements are met. The growers’ license number will also be the medical marijuana tax reference number. The grower will be issued a sales card with a magnetic strip on the back, photo identification, and all other licensing information necessary. This card is to be swiped in the dispensary’s card reader before any sales take place.

*Example: If a grower has a 600-square-foot vegetative room and a 600-square-foot flowering room, the total of this garden is 1,200 square feet. Therefore, the licensing for one year will be $1,200.

Seller’s License

Only applies to patient gardens. If patients grow more than they need, they should be able to apply for a patient seller’s license. This will allow them to sell their extra to the dispen-sary. The quality standards will have to be met in order to be purchased by the dispensary. The seller’s license information can be added to the patient medical marijuana card’s magnetic strip. The limits of this license are that the patient cannot sell more than 1.5 pounds per year or 681 grams. If patients want to sell more, they will have to apply for a commercial grower’s license.

The counties will all have their own sub-branches of the Department of Medical Marijuana. These offices will oversee inspections, process patient applications, issue medical marijuana cards to the patients, and act as a liaison to law enforcement and Department of Medical Marijuana license holders.

County Inspectors

The inspectors will be located in the county offices; that way, the local law enforcement, commercial growers, and dispensaries have an inspector they can call on if there are any issues that need to be resolved.

Commercial Growers

Have to allow inspectors into their operation when the agent provides proper identification. Law enforce-ment can enter without a warrant as long as accompanied by the local inspector. Growers must have the licensing posted visibly and in plain sight. If any laws are broken (i.e. too many plants, too many square feet, EPA violations, illegal sales, tax eva-sion…), the inspector has the right to follow whatever action is deemed necessary to correct the problem, such as issuing warnings, issuing cita-tions, or license termination. No more than three warnings per year, or the licensing can be terminated.

*Example: If a grower is using more square footage than the license allows, a fine and license upgrade would be fitting for the offense; how-ever, this offense will not happen in that order again, or the licensing can be terminated. The proper procedure would be to increase the square footage on the license and then the growing area.

*Example: If a grower is dumping chemicals: immediate license termi-nation, EPA called in, and possible criminal charges.

*Example: If a grower has a few too many plants, cut down the extra plants and issue a warning.

Dispensaries

Inspectors have the right to inspect the operation at any time; the agents must provide proper identification before entry. This is to ensure the dis-pensaries are selling medical marijuana that meets or exceeds the medical minimum guidelines, and to make sure all other department regulations are being met.

Law Enforcement

Law enforcement will benefit from the creation of this department. It will allow law enforcement to know who is a legitimate operation and who is not. In other states, law enforcement is unintentionally clog-ging up the courts with cases against people who are operating to the letter of the law. Meanwhile, it tears down the operation and stops the patients from getting their medicine. Now the law enforcement office can contact the local inspector’s office. The inspector can verify any information necessary and/or go to the facility to inspect it.

Law enforcement won’t have to come up with a warrant, waste taxpayer dollars dismantling a legal growing operation, the courts’ time, the law enforcement department’s time, and as a result stop the patients who need the medicine from being able to receive it. It does take approximately four months to have a usable prod-uct. This time is critical to the patient. Law enforcement should also be held accountable for its actions and should treat these future patients and business owners with respect. Smash and grab tactics that have been used in other states should not be tolerat-ed by our local law enforcement.

Judicial The judicial system and law enforce-ment will be able to stop using less than desirable tactics to generate rev-enue. The current prosecution of marijuana users is costing the taxpay-ers in this state millions of dollars per year. Currently, the court system will prosecute a citizen for possession of marijuana.

All of these options result in the loss of this individual’s employment, resi-dence, and now the taxpayers will pay for the incarceration. Why waste money on this any longer? We need our laws to be reformed also. If the state wasn’t strapped for cash, this wouldn’t be happening. The state, counties, townships, schools, and the taxpayers would all be able to take a breath and not have to worry about the next round of job cuts.

Commercial Growers

Commercial growers will have to obtain the proper licensing to begin cultivation. All building codes must be met to qualify. Certificate of liabil-ity insurance and FEIN number must be submitted with the license applica-tion. The grower also accepts having to do pro-bono work as part of the license requirements when the appli-cation is accepted. The grower will be issued a license number/grower num-ber on the dispensary data card and display the license. This number will be used on tax forms and for tracking sales to dispensaries. Commercial growers must abide by all laws set forth by the state Department of Medical Marijuana.

Dispensaries

Dispensaries will have the ability to obtain licensing through the state Department of Medical Marijuana. This licensing application will require a certificate of liability insurance and a FEIN number. The dispensary accepts having to do pro-bono work as part of the licensing requirements. The dispensary shall be able to pur-chase and sell medical marijuana and all other related goods and services. Dispensaries must abide by all laws set forth by the Department of Medical Marijuana.

Patients

Patients will have to get their recom-mendation from a doctor. The med-ical card will be issued by the county in which the patient resides, branch of the Department of Medical Marijuana. Patients will have to pay a $150 processing fee or $50 if they qualify for the pro-bono assistance for the medical marijuana card. Patients shall be allowed to grow 12 plants for their own personal use. Patients with fixed incomes should also be granted the same discount as they receive else-where. If patients grow too much product, they will have to obtain a seller’s license from the Department of Medical Marijuana before they can legally sell the product. The product will have to meet all minimum stan-dards in order to be purchased by the dispensaries. All patients must swipe the card to verify that the card is valid. Dispensaries will provide the amount sold to each patient when processing the information. Dispensaries will be allowed to provide all goods and services related to patients receiving medical marijuana.

Commercial Grower’s Taxes

Will be subject to all business taxes related to their business, and all income taxes that apply. I feel that a $2 per gram tax (or 5% sales tax and a 20% sin tax) should be imposed at the dispensary level. This tax is to be added to the per-gram sale, just as gasoline is taxed per gal-lon, and is to be divided in the follow-ing breakdown:

Jobs

Now, here we go with job creation. A 2,000-square-foot operation will need at least six full-time workers and six to eight people for security. The construction of this industry will increase the work in the building trades. By having to follow building codes, the likelihood that places will be burning down declines. The growth of this industry in any state will put a surge into the economy. One retail location could employ 20-plus people. The regulation of this industry will create hundreds of state and county jobs in the Department of Medical Marijuana, not to mention the numerous technical jobs at the dispensaries testing the quality of the medical marijuana.

To sum up this idea: if the state takes the reins and structures this industry in this fashion, it will take what is currently a black-market industry and make it produce real tax dollars. The sheer number of people that will benefit from this medication will eas-ily support the numbers that I have used in my examples. With the abili-ty to monitor all of the transactions, there will be no problems tracking the tax dollars from production to sale.

This draft has been read and cri-tiqued by many people. This is a con-glomeration of everyone’s ideas and questions. If you, the reader, have any questions or comments, please write them on this document and return it to your friend who gave this to you. Thank you for your time and your input.

Contact your local state representatives and tell them to support the Jacki Rickert Medical Marijuana Act and this tax plan. Let’s do this right! This idea is will benefit us all for a long time. This idea is not affiliated with the Jacki Rickert Medical Marijuana Act. But we do strongly support it, and urge your support also.

We need as much support as we can get to change the future. Meanwhile, patients will continue to go to jail for their medicine. Please help stop this horrible cycle.

Here are a few different questions (Q:), comments (C:), and statements (S:) about medical marijuana, along with the answers to them. (If you, the reader, have specific questions or have something to add or dispute, please write it down on the back of any page).

• The government won’t legalize medical marijuana because it can’t tax it. Medical marijuana can be taxed if a business pyramid struc-ture is established from the inception of this industry. The fol-lowing outline describes how to track production and taxable sales.

• If the law gets changed, “they” will have to apologize. No one who is seeking reform of marijuana laws in this coun-try is looking for an apology. The whole idea behind changing the marijuana laws in this country is that the people of this country should have access to safe, natural medication that grows as a finished product. (It does not have to be altered chemically in any way to be ready for human consumption.)

C: It will never pass in the state of Wisconsin! So far, this comment is true. The reason that it baffles me is that this state has an 80.3% approval rating, and rising, for medical marijuana. That leads me to believe that it is our fault that people are suffering needlessly. We need to utilize our civil rights and tell our state representatives to vote for this societal change.

I was sitting on the sidelines waiting just like you, watching as everything around us falls apart. We need to change this path we’re on. This idea is more than legalizing medical marijuana; it’s about serious social reform.

Here are a few different questions (Q:), comments (C:), and statements (S:) about medical marijuana, along with the answers to them.

• If it is legalized (medically), everyone will grow their own. Yes, some people will grow their own medicine. But let’s look at the number of people who grow their own vegetables. The actual number is low in comparison to the total population. Then you have to take into account that crop damage does hap-pen, and most people will give up when they find out how much work it actually takes to produce medical marijuana. Most people after failure will opt to purchase the medicine from the dispensary, not to mention the startup costs that can range from $1,000 and up. If I were on a fixed income and seriously ill, I don’t think that growing my own would actually be a viable option.

• What if patients grow their own and don’t grow enough to get through to the next harvest? Patients will be allowed to buy from the dispensary to offset their shortage. Patients who grow their own will have the right to utilize all goods and services provided by the dispensaries.

• It won’t get legalized because it makes the justice sys-tem too much money. Illegal marijuana use does net the justice system a lot of money; however, the justice system could bring in a lot more money if it received tax dollars instead of restitution money. Unfortunately, legalizing medical marijuana is not going to solve all of the crime in this world. But it will stop people who are fighting illnesses from being prosecuted and going to jail or prison for trying to get well. The beds in the prisons are not going to suddenly become empty either. They will just be filled with more people who truly should be in jail and not out on the streets.

• A bill (Jackie Rickert Medical Marijuana Act) will never pass on its first time through. This is not the first time this type of bill has tried to make it through the capitol of Wisconsin. Lobbyists have been trying to get this legislation passed since 1996. However, due to the lack of support, most bills died before they were ever launched.

• This bill is just a circus and a bunch of hippies who want to get high! This statement is derived from sheer ignorance. The fact is these bills are designed to help your neighbor going through chemotherapy, your grandmother with MS, your son or daugh-ter who returned from war and now suffers from post-traumat-ic stress disorder. Please talk to people with these conditions and ask them how the medications are treating them. There are so many things that medical marijuana can treat that if you are anti-medical marijuana, please educate yourself on the subject. The next person that could benefit from it could be you. If after edu-cating yourself you still don’t believe in it, you can still benefit from the break on your personal taxes.