Michigan House approves bill to tax, regulate medical marijuana after confusion over 2008 law

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LANSING, Michigan — Michigan would tax and regulate medical marijuana in a tiered licensing system similar to alcohol under legislation passed Wednesday by the House, where advocates said action is necessary due to confusion surrounding the legality of dispensary businesses and non-smokable forms of the drug.

The main bill, approved 95-11 and sent to the Senate, would require a state operating license to grow, process, sell, transport and test marijuana used for medical purposes. "Provisioning centers" that sell the drug to patients or their caregivers would pay a 3 percent tax on their gross retail income, in addition to the 6 percent state sales tax.

Another bill OK'd 96-10 would clarify that allowable marijuana includes non-smokable forms such as oils, food items and pills.

Michigan voters legalized medical pot in 2008, but interpreting the law that lets nearly 175,000 qualifying patients grow their own marijuana plants or obtain the drug from 33,000 registered caregivers has led to conflicts in the courts.

The state Supreme Court ruled in 2013 that patients and caregivers cannot transfer marijuana to another patient or anyone else, and dispensaries that facilitate such transactions can be shut down as a public nuisance. Some municipalities have let the dispensaries continue to operate while others have not.

"Our citizens want us to get this right. They want to provide safe, legal access to medications," said Rep. Jeff Irwin, D-Ann Arbor. He successfully lobbied to lower the proposed tax to 3 percent after raising concerns that an 8 percent tax would be too high and foster the black market.

The legislation — which would not impact patients who want to keep growing their own marijuana or buying from individual growers — would create a five-member board to grant operating license applications, assess fees, and oversee and inspect marijuana facilities. Background checks would be required.

The five-tier regulatory system would include growers, processors, "secure transporters," provisioning centers and testing facilities. They could not receive a license unless their local government adopts an authorizing ordinance.

The tax assessed on the provisioning dispensaries would generate an unknown amount to be split among the state and municipalities.

Michigan, which has a three-tier framework for alcohol suppliers, wholesalers and retailers, assesses extra taxes on beer, wine and liquor. Rules governing casinos require licenses and background checks for employees and others.

Some critics of the main bill, including Democratic House Minority Leader Tim Greimel, opposed taxing a medicine. Michigan exempts prescription drugs from sales tax.

But the sponsor, Health Policy Committee Chairman Mike Callton, R-Nashville, said the tax is necessary at least at the start. It would go away if Michigan legalizes marijuana for recreational use.

"I could see where there would be taxation on the actual recreational product like they do in Colorado but lift some of the taxes on the actual medical product," he told reporters.

Past legislation to legalize dispensaries easily won passage in the House but died in the Senate last year, primarily because of concerns from police and prosecutors. But Callton said the new legislation addresses their issues, and law enforcement is more open because other states have fully legalized marijuana. Michigan groups are pushing 2016 ballot drives, too.

"They started saying, 'It's not a matter of if, it's a matter of when. Let's create some sort of regulation and some sort of oversight that makes sense,'" Callton said.

The House also voted 99-7 for a bill would create a "seed-to-sale" tracking system in which purchases in excess of legal limits would be flagged.

The nonpartisan House Fiscal Agency said the state estimates a need for as many as 151 additional employees under the proposed regulatory framework. Under a "worst-case scenario" estimate of $21 million in annual costs, the average amount passed on to each patient would be $227, the agency said.

It added, though, that the Michigan Department of Licensing and Regulating Affairs seems to be basing its cost estimate in anticipation of the legalization and regulation of marijuana for recreational use.

Senate Judiciary Committee Chairman Rick Jones, R-Grand Ledge, said he was disappointed the House lowered the proposed tax because "there has to be enough money to make everything work right." He pledged to revisit the tax rate but said he expects to pass the bills.


House Bills 4209-10 and 4827: http://1.usa.gov/1VFtAVo

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