The Los Angeles City Council approved a measure Tuesday directing the city’s Office of Finance to stop issuing new business tax registration certificates (BTRCs) to medical marijuana dispensaries.

The city council has approved a measure that will discontinue the practice of issuing business tax registration certificates to new medical marijuana dispensaries. (photo by Edwin Folven)

Voters approved Proposition D in 2013, granting potential immunity to approximately 135 medical marijuana dispensaries that had been operating prior to a 2007 moratorium. Since 2013, the Office of Finance has continued to issue and renew BTRCs to dispensary owners without checking whether they are Proposition D compliant. The owners post the certificates in their shops, often giving the false impression that they are operating legally, according to authorities.

Los Angeles City Attorney Mike Feuer said the Office of Finance is not an investigative agency and does not question whether dispensaries, or any other business, is operating legally when BTRCs are issued or renewed.

“The Office of Finance has historically issued business tax certificates to any business, whether it might be operating lawfully or otherwise,” Feuer said. “The city council determined that there should be a clear distinction between medical marijuana businesses who might be operating lawfully and those who cannot be. They took a step to eliminate any potential confusion whether a business is operating lawfully.”

Feuer added that the practice of issuing BTRCs to non-compliant medical marijuana dispensaries was not a “loophole,” because BTRCs do not designate whether a business is legal or not. He said medical marijuana dispensaries that used the certificates to show they are Proposition D compliant are misleading the public. The city receives approximately $4 million to $5 million annually in taxes from approximately 500 dispensaries, according to reports.

Under the new rules, BTRCs will not be issued to any new medical marijuana  dispensaries. Feuer said that should be the case because no new dispensaries are allowed under Proposition D. The ordinance also makes it a misdemeanor for dispensary owners to lie about Proposition D compliance when renewing BRTCs annually. Displaying expired BTRCs is also a misdemeanor under the new ordinance.

The motion that led to the city council’s decision Tuesday was authored by Councilwoman Nury Martinez, 6th District. Adam Bass, communications director for Martinez, said dispensaries had proliferated to an unacceptable level in the San Fernando Valley district, and many other districts experienced the same problem.

Councilman Mitch O’Farrell, 13th District, said he believes the city was wrong to continue issuing BTRCs to medical marijuana dispensaries without checking their legal status.

“It’s amazing to me the city was in the business of offering business tax licenses to illegal businesses,” O’Farrell said. “I am proud to support this ordinance.”

The councilman added that the number of medical marijuana businesses operating in the district has diminished significantly, although exact numbers were not available.

“It’s about 10 times better,” O’Farrell added. “We have pretty much shut down all the non-compliant dispensaries in my district.”

Feuer added that the discontinuance of issuing BTRCs is part of the overall approach to regulating dispensaries, and that his office continues to work with the Los Angeles Police Department and community groups to identify and close dispensaries that are operating illegally. The city attorney said his office has closed approximately 700 non-compliant dispensaries since 2013.