The California Board of Equalization announced in February that cannabis products are subject to sales tax, including medical marijuana.

With as many as 500 outlets in the state generating two billion in sales, the state could collect $175 million in 2007 on cannabis drinks, baked goods, confections, ice cream, plants, herb, concentrates, topical ointments, and oral spray formulations.

The Board determined that SB 420 does allow sales under state law but since medical marijuana only requires a doctor’s recommendation it is not a prescription medicine and therefore not exempt from sales tax.

Since cannabis is still illegal federally, “retailers may decline to provide information on products sold due to concerns about self-incrimination,” according to a Board of Equalization Special Notice.

For 2007, revenues could be even greater than $175 million due to many retailers paying tax that was collected in 2006 before the policy was finalized. Some companies have been collecting sales tax on cannabis products since 2002,  reporting sales as other goods, such as tee shirts, coffee or soft drinks.

Most cannabis retailers have been paying federal income and payroll taxes as well as county property taxes for years, as well as providing workmen’s compensation and health insurance.

As more retailers report their sales, producers and suppliers will be able to report earnings and legitimize more of the $13.8 billion dollar California cannabis industry.

Some cities and counties, such as Oakland, San Francisco, and Santa Cruz, have laws calling for all cannabis sales to adults to be taxed and regulated as soon as possible under state law. The Board of Equalization’s ruling may allow these laws to go into effect.

The Board of Equalization information center telephone number is 800-400-7115.