PORTLAND, Ore. — Cities scrambled to pass taxes on marijuana before a legalization measure went before voters. Their bet: That the taxes would get grandfathered in.
But Measure 91, passed by voters on Nov. 4, has a clause forbidding any taxation on marijuana except by the state. Now, those cities say they are prepared to defend their taxes in court.
Attorney Dave Kopilak helped draft the law and is studying the response. Ashland City Manager Dave Kanner was one of the first to propose such a tax, which passed in Ashland this year.
Fairview Mayor Mike Weatherby was one of the supporters of his city’s 40 percent marijuana tax, which he says is intended to keep recreational pot dispensaries out of the city. Cities may opt out of hosting dispensaries, but Weatherby said the city is trying to “cover all of (its) bases.”
One thing they all agree on is that the Legislature, sooner or later, will likely have to step in.
Each took questions from The Associated Press. Their answers have been edited for clarity and length.
Is the tax applicable under the law?
Kopilak: Somebody got it in their heads that if ordinances were adopted before Election Day, that there would be some sort of grandfathering in. That’s just not true.
The imposition of such taxes is inconsistent with the main themes of Measure 91, which is to minimize the illegal market. If you have dozens and dozens of jurisdictions imposing all kinds of different taxes at different rates, it essentially makes any type of cohesive state policy impossible.
Kanner: When I first read the initiative language, it immediately seemed clear to me that the pre-emption language (prohibits) the adoption of a local tax in the future, but it does not repeal an existing tax. I realize that others may interpret it differently.
There’s another section of the initiative that repeals any city ordinance or charter provision in conflict with the measure. However, the measure taxes production of marijuana, and our tax is a gross-receipts tax on retail sales. Therefore, I do not believe it is in conflict with the measure. Whether lawyers or the courts will agree with that, I don’t know.
What was the impetus behind the tax?
Kanner: Ashland already has a food and beverage tax, so we had a template for a gross receipts tax on retail sales of marijuana. By the end of February, members of the City Council were asking me if we shouldn’t be considering a tax.
Weatherby: The idea is to keep marijuana dispensaries out of Fairview. Absolutely. We’re trying to cover all of our bases.
Has the city generated a revenue estimate for the tax?
Kanner: Any numbers I could provide would be a wild guess. I’m showing $824,511 annually from a tax on recreational marijuana, but who knows? I estimate (based on Legislative Revenue Office projections and the formula in the ballot measure) that the state tax would generate $20,000 to $25,000 a year for Ashland.
Weatherby: We have not.
What happens if the matter goes to court as a lawsuit brought by a dispensary?
Kopilak: The act allows local jurisdictions to opt out, so if you want to do that, then do that. But I would say, don’t do it this way. Do it the way the act intended. On the other hand, if the city or county is determined to see this through, unless the Legislature is willing to make a change, they won’t win in court. It will be spending tax dollars to defend a suit that’s unwinnable.
Kanner: That would be a decision the Council will have to make if/when there’s a legal challenge. Bear in mind that there are now, I believe, about 60 cities that have adopted marijuana taxes, so who knows whether a test case challenge would be in Ashland or elsewhere.
More troubling is the aforementioned provision that repeals existing ordinances and charter provisions that are in conflict with the measure. That’s a direct attack on cities’ constitutional home rule authority that, in my opinion, should be totally unacceptable to all cities, regardless of how they feel about marijuana and marijuana taxation. I would hope that if the Legislature does not move to amend or remove that language, that cities and the League of Oregon Cities will band together to fight it.
Weatherby: It would be the same as challenging a gas tax or a city sales tax. Attorneys differ on this, and it’s their opinions, just as doctors differ on their opinions. I think it would have to come down to what’s going to happen in the Legislature.
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