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Costa Mesa caught in a tax Catch 22 on medical marijuana shops

One of the best known poems in American literature is "Casey at the Bat." The ode, which a Google check indicates was published in 1888, relates the saga of baseball hero Mighty Casey and how overconfidence led him to strike out, blowing the chance of a win for his Mudville team.

The story came to mind recently after we read a story in the Orange County Register about the conundrum the city of Costa Mesa faces over two initiatives aimed at allowing medical cannabis dispensaries. Both measures were approved by the city clerk for further consideration. Supporters reportedly celebrated. But their hopes have yet to be fulfilled because the City Council stalled taking action because of a tax controversy.

To our way of thinking, the dilemma reflects the reality that tax law is already complicated and only gets more confusing as time goes by. It's one of the main reasons why the most common advice those with any sort of tax law question are likely to receive is to consult with an experienced attorney.

Both Costa Mesa initiatives call for a 6 percent tax on revenues from the marijuana dispensaries revenues. But there's a two-fold problem according to a city attorney. One is that there are competing laws on the books about when tax increases have to be put before voters. One would set the vote early next year. The second would put it off until 2016.

The concern is that the city could be opening itself up to civil action no matter what it does. Dispensary advocates might sue if the city opts for the later vote, and dispensary opponents could sue if the city opts for the earlier date. Another issue is that state officials have indicated that the 6 percent tax might be illegal under the uniform 1 percent sales-tax rate.

As is often the case with tough political issues, the City Council opted to put off any decision pending further study by city staff.

Source: Orange County Register, "Marijuana initiatives stirring the pot," Jordan Graham, Nov. 26, 2014

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