According to the report, only a fraction of the current 200-plus medical cannabis dispensaries and collectives pay state sales taxes. A substantial portion of the medical cannabis sales remains off the books because of the fear of federal prosecution. Despite this, a growing number of communities, led by Oakland, have begun to legally regulate and license medical cannabis sales through the dispensaries. Although the federal authorities continue to consider the dispensaries as criminal enterprises, most have lawfully complied with local regulations like other legal businesses.

According to the Oakland business tax office, the city’s medical cannabis dispensaries reported $26 million in revenues in fiscal year 2004. Revenues declined in 2005 when all but two of the dispensaries were forced to close, but revenue is expected to rebound again this year, as two new authorized clubs have opened.

Oakland’s cannabis clubs pay the city an annual licensing fee of $20,000 as well as a business tax of .1% on revenues. Potential revenues for Oakland are estimated as high as $64 million annually.

In addition, many dispensaries also pay substantial payroll taxes to the state. A Modesto dispensary, California Healthcare Collectives, Inc., before being raided and closed by the DEA, reported paying $93,000 per quarter in withheld federal payroll taxes; $25,000 per quarter in state withholding taxes; and $50,000 to $60,000 per month in state sales taxes. Closure of the dispensary has cost the public over $1 million per year in tax revenues.

The report estimated that between 150,000 and 350,000 Californians have been certified to use medical marijuana, representing approximately 10% of all marijuana smokers in the state. According to California NORML, altogether Californians consume nearly $6 billion worth of marijuana per year, which could net the state between $1.5 to $2.5 billion per year if marijuana were taxed and regulated for adult use.