Hawaii medical marijuana dispensaries may have tax loophole

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HONOLULU — The state might have unintentionally created a tax loophole when it wrote the rules for its new medical marijuana dispensaries system, a Hawaii lawmaker said Monday.


HONOLULU — The state might have unintentionally created a tax loophole when it wrote the rules for its new medical marijuana dispensaries system, a Hawaii lawmaker said Monday.

The Legislature created the system with a law passed this year, 15 years after state lawmakers legalized the drug for medical purposes.

But the way the law is written, dispensaries could be eligible for tax breaks if they set up in enterprise zones, which are intended to reward employers who set up in economically depressed areas.

The Legislature didn’t intend to give tax breaks to medical marijuana dispensaries, Rep. Della Au Bellati told The Associated Press in an interview.

“We need to fix this,” Bellati said. “We need those general funds, because this program is going to take resources.”

Eligible companies that are set up in enterprise zones don’t have to pay general excise taxes for seven years. They also get substantial breaks on state income taxes. The purpose of the enterprise zones program is to help agriculture, manufacturing, information technology and other specific types of businesses create jobs where they’re most needed.

Bellati said she would introduce legislation that closes the enterprise zones loophole.

“This industry is going to require a lot of government oversight and regulation, and part of the justification for the general excise tax was so that we could fund the government operations,” she said.

Every county has enterprise zones, and dispensaries would be eligible for the zone’s tax breaks if they meet all the relevant criteria, said Luis Salaveria, director of the state Department of Business, Economic Development & Tourism.

“They could apply, yes, and there wouldn’t be anything we could do to stop them,” Salaveria said.

It’s unclear how much money is at stake for the state. The Legislature didn’t set price controls on medical marijuana, so there’s no official estimate on the amount of taxes the state could collect, Bellati said.

Lawmakers and representatives discussed the issue and other problems with the way the system has been developed at an informational briefing.

They also were concerned that dispensaries won’t be able to carry medical marijuana between islands.

“We’re in an island state,” said Pam Lichty, president of Drug Policy Forum of Hawaii. “If we’re trying to provide access to patients, how can we deny them access if they’re on Molokai or Lanai or even Niihau?”

Hawaii’s next step in the process of setting up medical marijuana dispensaries is for people to apply for dispensary licenses.

The Department of Health will accept applications in January and then plans to select licensees by mid-April so the dispensaries could begin operating in mid-July. Each applicant must have at least $1 million in reserve to qualify to run a dispensary.

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