Medical cannabis patients eligible for fee reduction, but still face high tax rate
December 3, 2017
A state-backed medical marijuana identification card program, which allows cardholders to skip the sales tax when purchasing cannabis products, hasn't been popular among cannabis patients in recent years. But some say the program may ramp up in California when recreational cannabis use becomes legal in January.
Nevada County residents who already have current doctor's recommendations for medical cannabis can apply for identification cards through the county's Public Health Department, which processes the cards for the state. Other California counties have similar programs.
Cannabis patients who present their marijuana ID cards — along with another, valid form of identification — when purchasing from a dispensary are exempt from paying sales and use tax, according to the California State Board of Equalization. That exemption was granted in 2016, when California voters passed Proposition 64, The Adult Use of Marijuana Act.
A doctor's recommendation, when presented on its own, allows a patient to purchase medical cannabis from a dispensary not licensed for recreational sales, but doesn't qualify them for a sales tax exemption.
But few medical cannabis patients have opted for an ID card — in part because the program comes at a cost.
The Nevada County Public Health Department has issued less than 25 identification cards per year since the program began in 2004, according to Jill Blake, the department's director.
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The cards cost $100 — the maximum price any county health department can charge under the state's marijuana laws — and applying for one requires an in-person, scheduled visit to the health department's Grass Valley office.
MediCal participants are eligible for a 50 percent fee reduction on the price of a card and County Medical Services Program participants are eligible to have the fee waived entirely.
Hezekiah Allen, executive director of the California Growers Association, said the lack of interest in the identification card program isn't unique to Nevada County. It's typical around the state.
"Right now, we see pretty dramatic under-adoption," Allen said.
Besides a sales tax exemption, cannabis patients who choose to purchase the cards typically do so for personal security reasons, Allen said.
"It's the best way to not have your product confiscated. … And it's a really quick and easy way to demonstrate your legitimacy as a patient," he said.
But soon, that benefit won't hold as much weight. When adult-use becomes legal in January, anyone over the age of 21 will be legally permitted to carry up to an ounce of cannabis. Medical marijuana patients, however, will be permitted to carry more — up to eight ounces, according to the California Department of Consumer Affairs.
Still, Allen said the ID card program is likely to become a higher priority for medical patients in January. He expects some major changes to the medical cannabis system when recreational use becomes legal.
"If we've learned anything from the other states that have gone first in this experiment, we should be expecting pretty dramatic changes to the medical marketplace," Allen said. "I think those cards will become more of a requirement. … And as we see the adult use marketplace expand and come into its own, we'll see some pretty significant changes to who can even get those cards."
Nevada City, the only jurisdiction in Nevada County to approve a cannabis dispensary, allows only one marijuana retail storefront to operate. The city hasn't authorized recreational sales in preparation for next year's new regulations.
The city's future medical cannabis dispensary, Elevation 2477', was approved by city council members last month and is set to open early next year, according to Daniel Batchelor, the company's chief executive officer.
If the state begins requiring medical cannabis patients to have ID cards, as Allen predicts could be the case, the dispensary may not collect much sales and use tax.
But, after January, the state charges an additional 15 percent excise tax on cannabis, which retailers are required to collect from purchasers "based on the average market price of any retail sale," and pay to their distributor, according to the California Department of Tax and Fee Administration. ID cards don't exempt medical patients from that fee.
The state also taxes growers at a rate of $9.25 per ounce of cannabis flowers that enter the commercial market and $2.75 per ounce of leaves.
Nevada City is proposing an additional cannabis-specific tax structure, which, if approved by voters, would charge a 4 percent excise tax on the dispensary's gross sales receipts.
According to Paul Cambra, an information officer with the Tax and Fee Administration, people with medical marijuana ID cards will not be exempted from additional local taxes unless the language of a local ordinance specifically provides for that exemption.
Nevada City's proposed cannabis tax ordinance does not exempt purchases made by cardholders, according to Catrina Olson, the city's interim city manager, because the proposed fee is an excise tax and not a sales tax.
The city proposes charging fees for other cannabis businesses, too, including a tax of $4 annually per square foot of canopy space for growers using artificial lighting, $3 per square foot for growers using both natural and artificial lighting, $1 per square foot for only natural lighting and 50 cents per square foot for nurseries.
A 2 percent tax on gross receipts for manufacturing, processing and distribution businesses and testing laboratories is also in Nevada City's proposed cannabis tax ordinance.
Many fear those fees will trickle down to customers, who will end up paying a high price for medical cannabis. That could, in turn, discourage them from patronizing legal businesses.
Due to inaccurate information provided to The Union, this story has been updated to clarify when patients with ID cards were given exemption from sales tax.
To contact Staff Writer Matthew Pera, email email@example.com or call 530-477-4231.