Medical marijuana dispensaries are incorporated as non-profit corporations – this is a huge tax loophole. Because they must zero out the income balance at the end of the year, they pay zero corporate taxes.
They do not have shareholders, only “directors of the corporation,” who can be paid a salary.
How are they paid? Hard to know, because the names of these directors are confidential and only known to Arizona Department of Health. In fact, everything on the application is confidential. That would include the medical marijuana corporate members and employees. No one knows if they are deducting payroll taxes, unemployment insurance or Social Security taxes. And do they claim 1099 Employees, are they paying minimum wage, or paying for labor in cash?
Due to the lack of transparency and the veil of secrecy, there is no tangible way for the Arizona Department of Revenue to do their job. Why? Because the health department is not allowed to share any information, including sales data.
SB 1024 is designed to ensure all Transaction Privilege Tax is collected from the sales of medical marijuana products. Currently, the health department does not share sold inventory/sales data from medical marijuana to ADOR. Therefore, ADOR has no idea if the point-of-sale of medical marijuana in the dispensaries is accurate when they are audited. The bill would have ensured state agencies are communicating properly and sharing important data for audit.
The medical marijuana dispensary license should be treated the same as any other retail businesses in the state that collects privilege taxes and should NOT receive special status and unwarranted protection on remitting all of the privilege taxes owed to the state.
For years, we’ve been hearing from the Democratic Caucus that we need to close tax loopholes on corporations and businesses because they need to pay their fair share to fund education. When one thinks of nonprofit organizations, they think about public benefit organizations such as the United Way, March of Dimes, First Things First — they don’t think of this industry.
Only the health department knows the names of medical marijuana licensed board members, not the Department of Revenue (who collects income taxes). Even the locations of the grow facilities are confidential to county assessors (who collect property taxes).
How is it that this one tax-exempt Industry, that is not supposed to turn a profit, be worth hundreds of million dollars? One recent dispensary sale in Arizona will net those board members over $800 million of a personal windfall. Are they paying their fair share? By voting no, Democrats said yes to providing cover for an on-going, cloak of secrecy that could easily hide tax fraud and even money laundering.
For years we’ve been hearing that marijuana should be legal and treated the same as liquor. So let’s just compare. Every bar owner must purchase their products only through a licensed distributor. When the bar is audited, they must show all purchase orders, receipts and a full inventory of product is conducted.
This is not the case for medical marijuana operators, who receive special privileges. The people who put this on the ballot created a major tax loophole. The health department does track the transaction of the product as they should. However, because of this major loophole, the health department cannot share sales information with ADOR.
The medical marijuana business is virtually an all-cash business. It is utterly impossible to have a fair and accurate audit to match sales data from the health department with ADOR to collect proper sales taxes, paid only by the consumer. I don’t believe it was the intent of the voters to enable tax fraud or establish a cloak of secrecy around the industry.
Those who voted against SB 1024 support a hypocritical double standard. It is disrespectful to all other businesses and a slap in the face of Arizona citizens. Needing 45 votes to pass in the House, 19 House Democrats voted no to provide cover for their special interest group, the marijuana industry. They have also blocked bills that would regulate harmful pesticides, chemicals, mold and bacteria in this so-called medicine.