L.A. councilwoman: Stop registering illegal pot shops

Despite a city crackdown on medical marijuana shops, L.A. has allowed hundreds to register to pay city taxes

Los Angeles has allowed hundreds of medical marijuana shops to register to pay taxes and obtain official city certificates without determining if they are allowed under a voter-approved crackdown on the businesses. 

But City Councilwoman Nury Martinez is pushing to immediately end the practice, arguing Los Angeles shouldn’t be reaping tax money from businesses that are flouting the law.

“We shouldn’t be making money off of illegal business in the city,” Martinez said. Issuing a city document that creates the impression a barred business is legitimate is "the biggest hypocrisy," she said.

Martinez and other critics complain that pot shops have used the documents to convince customers and landlords they are lawful. 

Under Proposition D, approved by city voters last year, medical marijuana businesses and the landlords who lease space to them can be prosecuted if the shops don't meet several requirements, including being registered in the past and operating a specified distance from public parks and schools. 

When the law was passed, city officials estimated that fewer than 140 medical marijuana businesses would qualify to avoid prosecution under the new rules.

But this year, more than 450 medical marijuana shops filed renewals to pay business taxes, according to city officials. Hundreds more remained actively registered with the city.

A city finance official told lawmakers in June that city workers don't generally consider the legality of a business when it registers to pay taxes. Bemused, Councilman Mike Bonin asked if someone could register to pay taxes for selling whale meat, heroin or Cuban cigars.

Martinez said she's also been told the city finance office doesn't regulate businesses, "so therefore there hasn’t been a real will to stop” issuing new tax registration certificates. 

City Atty. Mike Feuer, whose office has shut down more than 400 marijuana businesses since the law went into effect, has stressed that a tax registration certificate is not a city permit -- something that is written on the document itself.

Some trade groups also criticize the city's practice. Yamileth Bolaños, president and founder of the Greater Los Angeles Collective Alliance, a trade organization for medical cannabis providers, said it is “ridiculous” for the city to hand out certificates to shops that don't meet Proposition D's requirements. Members of her group are compliant with the city law, she said.

“When we’re trying to run the way that the city wants us to run, and someone else gets a [tax registration certificate] and opens up across the street and they don’t give a damn, it gives those of us that are trying to do it correctly and legally a bad name,” Bolaños said.

The city has to tread carefully in the face of federal law that outlaws marijuana sales, said David Welch, an attorney who represents medical marijuana businesses. Los Angeles could face a legally thorny situation if it becomes “an active participant” in deciding which businesses qualify -- something that could make it seem as if it promotes violations of federal law, Welch said.

“In any other business, this would seem rational” for the city to decide which ones are allowed, said Welch, whose clients include businesses being prosecuted under Proposition D. “But for marijuana, because it is illegal under federal law, it becomes a major concern for the city.”

To some neighbors annoyed about new shops continuing to crop up, however, the current City Hall practice of issuing tax certificates to businesses that the city attorney is working to shut down makes no sense.

“It goes against everything that the voters voted for,” said Howard Benjamin, vice president of the Van Nuys Neighborhood Council.

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