Monday, October 2, 2017
Court of Appeal:
City May Condition Limited Immunity for Marijuana Shops on Past Tax Payments
By a MetNews Staff Writer
A city may restrict grants of limited immunity to those medical marijuana dispensaries that have been paying business taxes, the First District Court of Appeal held Friday, rejecting a trial judge’s view that this created a new penalty for dispensaries that had not paid taxes and was thus an ex post facto law.
“Local governments may rationally limit medical marijuana dispensaries to those already in operation and compliant with prior law as past compliance shows a willingness to follow the law, which suggests future lawful behavior,” Acting Presiding Justice Stuart R. Pollak said in his opinion for Div. Three.
The opinion reverses the denial by Solano Superior Court Judge Paul L. Beeman of the City of Vallejo’s motion for a preliminary injunction against continued operations of medical marijuana dispensary operated by NCORP4, Inc. which had been denied limited immunity based on non-payment of taxes from the start of its operations until February 15, 2015.
Prior to 2015, all businesses not enumerated in the zoning code were considered nuisances. Marijuana dispensaries were not on the list of approved businesses.
Taxed Illegal Businesses
Nonetheless, voters in the city in 2011 enacted a tax on such businesses, while expressly not legalizing them.
In February, 2015, the city council suspended the tax based on the “proliferation of medical marijuana dispensaries” and the notion that “accepting taxes from those engaged in an activity that is not lawful under the city’s land use regulations tends to confuse the public as to the city’s policy and undermines enforcement of the city’s land use controls.”
In July 2015—by which time there were more than 40 illegal medical marijuana dispensaries in the city—the city council adopted the ordinance which Beeman declared unconstitutional.
Beeman said of the ordinance:
“It amounts to in essence an ex post facto law, making activity that was legal at the time committed (or at least subject to very limited penalties) suddenly and retroactively illegal (or subject to greater and much different penalties).”
No Penalty Increase
The city argued on appeal that the ordinance does not retroactively boost penalties for non-payment of taxes but merely “limits the many aspirants to sell medical marijuana in the city to a manageable number by preferring those who have demonstrated a willingness and ability to comply with local law by paying the.. tax when the city enforced it...and to continue paying taxes as a condition of immunized operation.”
Pollak responded: “We agree.”
He went on to say:
“A dispensary’s timely payment of business taxes provides Vallejo with a rational basis to conclude that the dispensary will continue to act in a law-abiding manner. NCORP4, which did not pay its business taxes, was reasonably denied immunity to continue operations.”
No Constitutional Violation
Pollak noted that both the federal and state constitutional bans on ex post facto laws relate to penalizing criminal conduct.
“The constitutional prohibition on ex post facto laws is inapplicable to local ordinances regulating the operation of medical marijuana dispensaries.”
He dismissed the contention of the dispensary that the city council impermissibly amended the 2011 initiative by increasing the penalties.
“The civil penalty for nonpayment of taxes remains what it has always been, a financial penalty calculated as a percentage of unpaid taxes,” the jurist pointed out.
The ordinance, he said, is a separate measure that uses past payment of taxes “as one of several standards for granting dispensaries immunity from prosecution as a public nuisance.”
The case is City of Vallejo v. NCORP4, Inc., A149907.
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