Maricopa County to enforce business property tax on medical marijuana dispensaries

Maricopa County Assessor Paul Petersen wants medical marijuana dispensaries to pay personal property taxes, and the county’s dispensaries say they’re happy to comply.

But they’re not happy with the way Petersen is going about it, according to Kevin DeMenna, lobbyist for the Arizona Dispensary Association.

Since Arizona voters legalized medical marijuana in 2010, most dispensary owners have been unaware that they owe taxes on business personal property, the value of which businesses are required to remit annually to the state.  Kevin McCarthy, president of the Arizona Tax Research Association, said that covers everything in a business’ building that isn’t nailed to the floor: Computers, display cases, equipment, or other movable items.

According to a press release from the assessor’s office, Petersen “will be placing medical marijuana businesses on the personal property roll for the first time this Friday. This will include applicable penalties for the many medical marijuana businesses who fail to report their property as required by state law.”

Petersen will announce those penalties and the impact of assessing the business personal property at a press conference Thursday morning.

DeMenna said there’s no conspiracy by dispensaries to not pay taxes, just confusion amidst a new industry in the state.

“Arizona’s business personal property taxes are some of the most byzantine and complex aspects of Arizona’s tax system,” he said. “Taxation through press conference is not ideal. We have every intention of being in full compliance, and in fact, expect that with future dialogue and a better understanding of the system, we will be in full compliance immediately.”

Earlier this year, dispensary owners were sent notices and forms from the assessor’s office asking them to put a value on their business personal property — while it’s the responsibility of the state to assess real property, business owners are responsible for valuing the rest, according to McCarthy.

In conversations with dispensary owners, DeMenna said it’s possible some have received such form letters in the past, but most are unaware.

“No one seems to know about this. No one,” he said. “We understand that only about a dozen (dispensaries) have paid. (The assessor’s office) think that there’s more than a hundred out there. We will be in full compliance.”

McCarthy said it’s not uncommon for a business to fail to pay those taxes based on honest confusion.

“They’re not the first entity that didn’t realize to pay their personal property tax,” he said. “Now, it is their obligation to know. In most instances in the tax realm, whether its property taxes, sales taxes, or income taxes, it’s the individual’s or the business’ responsibility, right, to know what their tax obligations are.”

Depending on how much personal property a dispensary owns, they may not owe anything at all in taxes. State law exempts the first $124,000 in business personal property from taxation, according to McCarthy. However, if a dispensary owner runs multiple locations, the exemption only applies to one dispensary, not several locations, McCarthy said.