Medical marijuana is an $18 million dollar tax boon for the City of San Jose, but two of the South Bay’s largest dispensaries are now in a conflict with city leaders.
In February, the Investigative Unit revealed that some San Jose pot shops owe millions in unpaid marijuana taxes.
In that story, San Jose Mayor Sam Liccardo sent a message to the owners of Medimarts in East San Jose and All American Cannabis Club in West San Jose, “Pack up, it’s time to move on and pay up on your way out,” said Liccardo.
Dave Armstrong, President and CEO of Medimarts, said the Mayor’s tough talk puts him between a rock and a hard place. “The city wants us to do something, but on the other hand it’s illegal,” said Armstrong.
Armstrong argues that by paying the city’s Marijuana Business Tax, he’s also admitting to selling a federally banned substance. “So which of is the worse of the two?” he said. “Breaking federal law or breaking a municipality ordinance?....It’s where we’ve been for three years.”
The All American Cannabis Club (A2C2) in San Jose makes the same argument… Founder Dave Hodges said the city is using back door tactics to shut him down.
“Really what they are trying to do is force our landlords to evict us so that they don’t have to take legal actions,” said Hodges.
“We are being evicted,” he said, but said his landlord sides with him. “Our landlord doesn’t want to evict us.”
“[Our landlord is] looking at lawsuits against the city as well,” he added.
InvestigativeSome Pot Shops Owe Millions in Unpaid Taxes
Mayor Liccardo said his administration has been successful in shutting down 21 of 23 dispensaries that were ineligible to operate according to the city’s rules.
Liccardo said he won’t back down. “The remaining two, we are just going to keep pushing,” he said, referring to Medimarts and A2C2.
Combined, both businesses owe the city more than a million dollars in unpaid marijuana business taxes and penalties. As a result, San Jose has responded with a letter dated March 9th, 2015.
In the letter, The City writes, “Medimarts has been disqualified from the city’s process to register.”
The letter then demands, “It must immediately cease all operations.”
Armstrong said he’s not yet seen the letter: “I haven’t seen it, I haven’t read it. It has not been emailed to me,” said Armstrong.
He explained, “We do not receive correspondence via US mail.”
The city says it has received proof from the US Postal Service that the document was delivered. In an email to the Investigative Unit a San Jose spokesperson wrote, “We don’t have any control about whether people read what is delivered to them. We followed all proper city code in serving the letter and personal service is not required.”
At A2C2, city leaders issued a $30,000 citation against Hodges’ landlord. The fine cites code violations for hours of operation and packaging of medicinal marijuana, among others.
“It’s really one of those situations where at any moment they could come in, shut us down and raid us,” said Hodges.
In the meantime, Armstrong is trying to extend the life of his business by engaging in legal action against the city.
“I want a judge or a jury or both, to look this,” he said. “I want the people of California, the people of San Jose, to see what’s really going on.”
“I’m not going anywhere either,” said Mayor Liccardo.
Liccardo said he expects the city and the dispensaries to find a way to coexist. “But we’re going to do it with everybody playing by the rules, and everybody paying their fair share of taxes,” he said.
At this point, it appears that it may take legal decision to end this debate.
Dave Hodges had a simple reaction to that: “Take me to court,” he said. “We’re ready.”