L.A. Can Still Regulate Medical Marijuana Shops

When he described L.A.'s medical marijuana industry in the April 2010 issue of Reason, Brian Doherty noted that no one really knew how many dispensaries there were, although "more than 500" was a reasonable estimate. There is still no complete count, but the Los Angeles Times reports that 372 shops have filed forms so they can pay the city's new 5 percent tax on dispensary revenue, meaning they are keen to be as legitimate as it is possible to be when your business is a criminal enterprise under federal law. But those efforts may be for nought, since the Los Angeles City Council is considering a ban on all dispensaries. The Times says "a recent appeals court decision…thwarted the city's plans to cap the number of dispensaries at 100 through a lottery," which is true, and "raised doubts about whether the city has the power to impose significant public safety regulations, such as restrictions on locations," which is misleading.

Two months ago, California's 2nd District Court of Appeal overturned Long Beach's licensing system for dispensaries, saying it "goes beyond decriminalization into authorization," thereby violating the federal ban on marijuana. In particular, the court concluded that using a lottery to award permits represented an official stamp of approval for medical marijuana suppliers, whereas declining to punish them under state or local law does not. But the court explicitly said cities can still impose restrictions on dispensaries, including rules about location and hours of operation; they just can't award permits to a subset of applicants. So while L.A.'s cap on dispensaries violates the logic of this ruling, that does not mean it cannot regulate pot shops. Even the tax should pass muster, since it is a levy imposed on the gross revenue of each dispensary, as opposed to the $15,000 permit fee collected by Long Beach. The appeals court noted that the state Board of Equalization taxes medical marijuana sales, a process that involves issuing a "seller's permit," which "does not 'allow individuals to make unlawful sales, but instead merely provides a way to remit any sales and use taxes due.'" Still, the L.A. City Council may decide that banning dispensaries altogether, an option approved by another state appeals court last month, is the easier course.

[Thanks to Richard Cowan for the tip.]