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Washington became one of the first states to legalize marijuana for recreational use in 2012. But there are a lot of challenges ahead: the state must set up a licensing system for marijuana growers and sellers, the federal government may mount a challenge, the need to set a new limit on amount of marijuana in the bloodstream for safe driving. And medical marijuana is still in the picture.Over the next several months we will be exploring the issue and tracking the impact of I-502.

Seattle City Council Rejects Tax Break For Pot Growers

Flickr Photo/Scott Beale (CC BY-NC-ND)

Marijuana growers who want to sell their products in Seattle will have to pay business license tax to the city.

On Monday, the City Council voted not to give pot growers a tax break reserved for farmers.

The tax, also called the business and occupation (B&O) tax, applies to anyone doing business in the city. Retail sales are taxed at .215 percent of gross revenues.

On the books is a long-standing exemption for farmers who sell their own fruits, vegetables, dairy products, eggs, fish or meats in the city.

Now that the state has legalized the recreational use of marijuana, the city wants to make sure that pot farmers don’t get the same tax breaks as potato farmers.

“Marijuana is a new industry that is promising to be a good, strong, commercially viable industry. And consequently it’s appropriate that it should bear its tax burden as well,” said Seattle City Attorney Pete Holmes, who proposed removing the tax exemption for pot farmers.

Marijuana advocates have long understood that if the marijuana were to be legalized, it would have to be subject to all taxes, according to City Councilmember Nick Licata.

He called yesterday’s City Council action “really pretty boring legislation, in line with everyone’s expectations.”

But some in the industry say removing the exemption for pot growers is unfair.

Todd Arkley is an accountant who works with pot businesses. He testified before the council that growers will already pay a hefty 25 percent excise tax on their sales, and federal law prohibits them from writing off their expenses.

"There are enough additional taxes right now,” Arkley said. “We should hold off and let these companies try to thrive as much as they can."

Licata says it’s anyone's guess as to how much the city can earn from applying the tax to pot growers. He thinks it could be up to $1 million a year by 2019.

Year started with KUOW: 2005