San Diego Audits Marijuana Dispensaries in Hopes of Boosting Tax Revenue

In an effort to boost tax revenue, San Diego is beginning to audit the city’s legal marijuana dispensaries. Currently, sales to medical cannabis patients are tax-exempt, but the city is aiming to ensure that dispensaries are complying with the five percent tax on all cannabis sales, a number that is jumping up to 8 % on July 1, 2019.

Many customers have been skirting the sales tax by showing dispensary workers a physician’s recommendation. However, this is set to change, as the city treasurer is planning to force dispensaries to require customers to present their state-issued Medical Marijuana Identification Card in order to be exempt from paying the state tax.

Photo by Alex Person on Unsplash

While some dispensaries in the area have made some honest mistakes in calculating the newly implemented city cannabis tax, regulators want to make it clear this should not be viewed as a crackdown. This sentiment is echoed by the owners of the city’s dispensaries, who are in support of the audit.

Rachel Laing, a spokeswoman for the United Medical Marijuana Coalition, told the LA Times, “Our organization supports this, and our members volunteered to be audited to ensure they were accounting for and remitting taxes properly because they want to avoid mistakes that would amount to costly surprises if discovered later.” She continues, “The audits are less about suspicions by the city that dispensaries are noncompliant, and more about the city wanting to understand and be reassured they’re collecting adequately. It’s in dispensaries’ best interest that they ensure they’re remitting properly and correct any mistakes early.”

The audit is expected to sharply increase the city’s tax revenue, especially with more plans to further development of the cannabis industry in San Diego. The city issued 19 approvals for dispensaries, but only 13 are in operation right now. 40 new marijuana production facilities are also slated to open, including indoor cannabis farms and dedicated edible factories. Between January and June, San Diego collected $2.7 million in tax revenue, and with more infrastructure being developed, that number is expected to increase to more than $6 million by June 2019.