L.A. Moving In On Marijuana Regs

September 28, 2017 by · Leave a Comment 

A Los Angeles City Council committee approved a draft of new regulations for the cannabis industry Monday amid concerns — which Council President Herb Wesson pledged to address — that the proposed rules could drive suppliers out of business.

Dozens of representatives of the industry attended the meeting of the Rules, Elections, and Intergovernmental Relations Committee, with many saying that the guidelines as they stand could cause a delay in cultivators and manufacturers getting licensed before marijuana becomes legal for recreational sale and use on Jan. 1.

Not long after the meeting began, Wesson told the audience he was aware of the issue and was working on a way to address it, with one option possibly being a provisional license system. He also said he wanted to get the City Attorney’s Office working to vet the part of the “75 percent to 80 percent” of the guidelines that everyone seemed to agree on.

“I’m not going to wait and then be panicked for time when we attempt to make this deadline. So at least if we can get (the City Attorney’s Office) moving, I’ll listen to your concerns, and we will try and come up with a way to address that, as well,” Wesson said.

Wesson also said concerns over a ban of on-site consumption that the guidelines call for would be addressed later as the city studies the issue.

In November, California voters approved the legalization of recreational marijuana, effective Jan. 1, 2018.

The legalized industry could fetch the city more than $100 million annually in new tax revenue, and in March city voters approved Measure M, which sets up regulatory measures for the city’s industry.

Once implemented, Measure M will replace Proposition D, which was approved in 2013 by city voters and limited the number of dispensaries within Los Angeles city limits to 135 — the number of dispensaries operating before Sept. 14, 2007.

The draft regulations moved forward by the committee outline the process for retail shop owners, growers, manufacturers and other industry businesses to receive a city license to operate — which will be needed along with a state license — as well as rules for operating.

The guidelines give priority licensing to existing shops that received a business tax registration certificate after 2014 and that are operating in compliance with the limited immunity and tax provisions of Prop D.

The city is also developing a social equity program aimed at increasing minority participation in the industry, and the proposed guidelines state that no license applications will be accepted until the social equity program is approved.

Ellen Mellody, a spokeswoman for the Southern California Coalition, an industry trade group, estimated that as a result of the priority process and the social equity program not being finalized, it would be April at the earliest that suppliers could get a license.

While the city has allowed retail medical marijuana shops to operate in the city, it has never expressly allowed cultivators or manufacturers to operate, and Mellody said this could leave them without a license come Jan. 1, which will drive many out of business as shops look to buy their products legally from suppliers outside of the city.

Recreational use, retail sale, manufacturing and personal cultivation of marijuana become legal in California on Jan.1, 2018. Cities across the state are rushing to put regulations in place before the New Year.

Recreational use, retail sale, manufacturing and personal cultivation of marijuana become legal in California on Jan.1, 2018. Cities across the state are rushing to put regulations in place before the New Year.

“The city has only acted like the legal part of this industry is the back-end retail shops. The plants don’t grow themselves. They don’t get into a truck and package themselves,” Mellody told City News Service. “It’s absurd to think, ‘Oh, the shop is legal. We don’t know how the product got here.”’

Mellody also said there are many “trusted” suppliers in the city with which the retail shops have longstanding relationships, and that shop owners don’t want to have to find new suppliers outside of the city.

Wesson said he was considering a way for suppliers to get a provisional license as the city processes applications.

“That’s the fragments of an idea that I am kicking around my mind right now, and so something like that. I haven’t quite sorted it out yet,” Wesson said to a speaker who called for a provisional license system.

The guidelines would also ban the on-site consumption of marijuana, set the hours that a shop could be open, require the presence of security cameras and also require shops to hire or contract for security personnel.

On-site consumption would be allowed by state law starting in 2018, if the local city allows it. Mellody said the SCC was concerned about the on-site ban but it is an issue that is not as important as some others it was looking to immediately address.

Bruce Margolin, executive director of the L.A. chapter of the National Organization for the Reform of Marijuana Laws, said the on-site ban would leave some consumers without a place to use cannabis, since many hotels and apartment buildings ban smoking and that consumption also would not be allowed in public.

“The current status with denying on-site consumption means that they have no place to go unless they own a residence or have access to a residence, which is completely unfair,” Margolin said.

As he did with licensing, Wesson said he was aware of the issues a ban of on-site consumption could cause and that city staff would be reporting back on options, including how other cities are handling the issue.

“Know that it is not on the back burner and we are doing as much as we can and I’m proud of where we are. And I just want you to know that your recommendations don’t fall on deaf ears,” Wesson told Margolin.

L.A. Ends Tax Licensing of ‘Illegal Pot Shops’

January 21, 2016 by · Leave a Comment 

The city will stop issuing new business tax certificates to medical marijuana dispensaries under an ordinance approved Tuesday by the Los Angeles City Council.

Despite the 2013 voter approval of Proposition D, which banned most medical marijuana businesses in Los Angeles, city finance officials have continued to issue tax certificates and collect taxes from them, illegal or not.

Some medical pot shops in the city are still allowed to operate due to exceptions in Proposition D, but finance officials said they are unequipped to determine whether a medical marijuana dispensary is in compliance and must leave the potentially complex legal question to be sorted out by city attorneys.

City leaders said collecting taxes while also banning medical marijuana businesses sends a mixed message, prompting them to simply cut off the issuance of any new tax registrations.

The ordinance approved by the City Council Tuesday calls for no new tax registration certificates to be issued for “any medical marijuana collective business activity.” The mayor must also sign off on the ordinance before it can go into effect.

Councilman Joe Buscaino said the few pot shops that are allowed under Proposition D had to have already registered by September 2007, so this new ordinance “finally puts an end to the issuance of business tax licenses to illegal pot shops in the city of L.A.”

He said by halting the issuance of new tax certificates to dispensaries, the city will be “inhibiting fraudulent activity” and curbing what appears to be an increase in dispensaries despite the enactment of Proposition D.

Councilman Marqueece Harris-Dawson said a “mix” of illegal and legal pot shops has “hijacked storefronts” in his district for medical marijuana sales.

“This was one of the main issues that came up in almost every neighborhood house meeting,” he said.

Some city officials have accused medical marijuana dispensaries of using the tax certificates to trick landlords and others into thinking they are permitted businesses.

“As much as we try to shut the illegal ones down, they turn around and we issue a BTRC (business tax registration certificate) to them,” City Councilwoman Nury Martinez told City News Service last fall.

The city collected $4.4 million from 447 dispensaries toward the end of last year, even though only an estimated 100 or so dispensaries were thought to be in compliance with Proposition D.

The city collected $5 million in 2014 from 519 tax registration certificate holders that identify themselves as marijuana businesses.

The ordinance adopted Tuesday was based on the idea that any newly registered medical marijuana business could not possibly qualify for the exception in Proposition D, which gives immunity to businesses that can show they registered by a certain date and comply with several other requirements.

The ordinance also makes it a misdemeanor for a business operator to lie on an affidavit attesting that the dispensary complies with Proposition D.

The ordinance makes filling out the affidavits a part of the process of registration renewal, which is done through the annual payment of taxes.

Displaying or maintaining “expired, suspended or otherwise invalid” tax certificates will also be considered a misdemeanor under the ordinance.

City officials are also working to change the color of the tax certificates and include language to make it clearer that such certificates are only for “tax compliance purposes,” according to city attorneys. Efforts are also underway to stop giving medical marijuana businesses the ability to register for tax certificates or file taxes online.

Holding a certificate does not indicate that a business is legal, only that the business has applied to pay taxes to the city. Medical marijuana businesses that are permitted to operate under Proposition D are required to pay business taxes to the city.

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