Officials push pot tax as loophole looms
The states voters are poised to decide in November whether the use of recreational marijuana will be legalized in Oregon.
In turn, the Hillsboro City Council is poised to ensure the city has the ability to tax marijuana sales if Measure 91 is approved. The citys leaders say they want to preserve their taxing options in the event voters give pot a green light.
At a Sept. 16 meeting, four council members unanimously endorsed that idea after a first reading of an ordinance establishing a tax on the sale of marijuana and marijuana-infused products in Hillsboro.
The ordinance, No. 6101, would impose a gross receipts tax on the retail sale of medical marijuana and recreational marijuana (if approved in November).
However, the ordinance goes on to stipulate that medical marijuana would be taxed at zero percent, provided the buyer is a registry identification cardholder under provisions of the Oregon Medical Marijuana Program. Sale of recreational marijuana would come with a 10 percent tax.
Andrew Bartlett, management analyst for the Hillsboro city managers office, prepared a memorandum for the mayor and city council members regarding the proposed tax. In the memo, Bartlett pointed out that there is nothing in Oregon law that prohibits a city from taxing marijuana, but Measure 91 does contain language that would prohibit local government from taxing marijuana if the measure passes.
In addition to making marijuana legal in the state, Measure 91 would prohibit any tax on marijuana sales except those imposed by the state.
State has exclusive right to tax marijuana, reads Section 42 of Measure 91. No county or city of this state shall impose any fee or tax in connection with the purchase, sale, production, processing, transportation and delivery of marijuana items.
But in an apparent loophole, cities are not prohibited from passing a tax in advance of Measure 91s possible approval, and a local tax on marijuana could be grandfathered in.
Currently, no law in Oregon prohibits a local government from taxing marijuana, explained Patrick Preston, Hillsboros public affairs manager. While we do not have a crystal ball, we want to be prepared in advance of the vote on Measure 91.
Moving forward with the consideration of a local marijuana sales tax right now allows for the matter to take effect ahead of the November vote.
City officials are eyeing the tax as a possible new revenue stream.
Taxing the sale of marijuana would be a new revenue source for the city of Hillsboro, Bartlett explained in his Sept. 4 memorandum to the council. At this time it is unknown how much revenue the city could receive from a tax on the sale of marijuana products.
Several individuals at the council meeting objected to the proposed tax, including Hillsboro resident Kyle Markley, the Libertarian candidate for state representative in Oregon House District 30.
The state has a specific right to tax marijuana, and this proposal will be overturned in any inevitable lawsuit, Markley told the council members. Im bothered by the city wasting taxpayer money. The council is supposed to do the right thing and respect the will of the voters, not look for loopholes.
City council member Steve Callaway voted to approve the tax on Sept. 16, and expects to do so again when it comes before the council for a final vote Oct. 7.
I do expect to support it, Callaway said. Marijuana use is federally banned, and if it is legalized in Oregon there is a fine line that will need to be monitored. I view the tax as a way to help fund that monitoring of that fine line.
The marijuana industry deals largely in cash transactions, and we expect there will be additional needs for public safety and regulation if Measure 91 is approved, added Preston. Regulating marijuana retail businesses at a time when the federal government classifies marijuana as an illegal substance will require additional staff time to review and ensure compliance with all applicable Oregon laws, and may result in additional legal costs.
We believe these additional costs should be borne by users of marijuana, rather than the general public.
Callaway said the fact the tax would apply only to recreational marijuana was an important distinction in gaining his support.
If it were to put a tax on medicine, that would have been a serious concern, he said. That would not be fair or appropriate.
On Monday, Sept. 22, the Forest Grove City Council voted in favor of a plan to tax recreational pot but not medicinal marijuana.
Callaway added that the wording of Measure 91 states that cities shall not impose taxes, but it is legally unclear whether an existing tax could be grandfathered in.
No doubt this will be decided by the courts, Callaway said. If courts decide the tax is legal, it protects us for that option. That does not mean the tax will be implemented, but it keeps that option available to us.
Following the councils Sept. 16 vote to support the ordinance, Markley said the city was risking taxpayer dollars.
I believe their case for grandfathering is weak. I think they have no chance at all of prevailing, and they look foolish for trying, Markley explained. I want my city to be a responsible steward of taxpayer resources. I dont believe for a moment that the city council would be willing to put their own money on the line to defend this dubious ordinance, but they appear willing to spend other peoples money to do so.
Markley added that he believes the proposed tax creates an image problem for the city of Hillsboro.
Its poor optics for the city, trying to tax something right before they lose the power to do so, he said. The city could be seen as trying to exploit a loophole against the will of the voters.
A second and final reading is set for the city councils Oct. 7 meeting in the Hillsboro Civic Center. If approved then, the new ordinance would go into effect 30 days later.