Prop. 64 Taxes Are Threatening Charity Groups Who Give Away Pot To Chronically Ill Californians

For decades, charity groups have been giving free cannabis to low-income veterans, sick kids and other patients under the radar. Now that pot is legal in California, they’re having to pay taxes on these donations.

A new bill moving through the Legislature could exempt donated marijuana from state taxes created under California’s Prop 64. Nonprofit owners, farmers and dispensaries say the new regulations have made it more difficult for them to give pot to chronically ill people who can’t otherwise afford it.

Josef Airone founded San Francisco’s Sweetleaf Collective in 1996, and says he supplies free weed to between 100 and 150 low-income, chronically ill patients each year. Now he says he’s being hit with excise and cultivation taxes for everything he gives out.

“We’re being taxed as if we’re selling it,” he said. “Compassionate projects were not invited to the table when Prop 64 was being drafted … that has kind of been forgotten in this new wave of cannabis entrepreneurs where everyone is just seeing dollar signs.”

There are more than two dozen cannabis projects supporting the bill, including groups that give weed to veterans, cancer patients and chronically ill children.

Ed Gallagher, a 68-year-old San Francisco resident who’s been receiving free weed from Sweetleaf for about a decade, says it’s a crucial part of treating his HIV and cancer.

As a senior living on social security income, Gallagher says he isn’t able to pay dispensary prices. Without the Sweetleaf program, he says he’d have to go to the black market for cannabis to ease his daily stress and aches.

“I don’t go to the pot stores,” he said. “[Sweetleaf] take[s] care of me so I don’t have to spend my food money on medical pain medicine.”

Opposing groups include the California Police Chiefs Association and the California Narcotics Officers Association, which says the bill “opens the door to possible illicit diversion of marijuana” and needs more safeguards.

A legislative analysis estimates the bill would result in annual revenue losses of $10 million. That would include $7.9 million in lower sales and use taxes, and $2.1 million in lower cultivation taxes. Much of the revenue from Prop 64 is promised for special projects, including research on the health effects of marijuana and youth education programs. State officials initially predicted that legal cannabis would generate $1 billion in revenue each year, but sales have fallen short so far.

Airone says his group has been fundraising in order to pay taxes on the marijuana they’re giving out. This year they’ve dispensed about an ounce each to 50 patients —  they used to get an ounce-and-a-half — at a cost of roughly $500 in taxes. He says other compassionate care projects have called it quits because of the price.

“We’re trying to operate under this new framework, but it’s definitely hampering how much we can give out,” he said.

The bill recently passed the Assembly Business and Professions Committee unanimously, and now heads to the Assembly Committee on Revenue and Taxation.