Chapter 3.70
EXCISE TAX ON MARIJUANA

Sections:

3.70.010    Applicability, purpose and authority.

3.70.020    Definitions.

3.70.030    Excise tax on marijuana.

3.70.040    Exemptions.

3.70.050    Tax returns.

3.70.060    Involuntary returns.

3.70.070    Amended tax returns.

3.70.080    Application of payments.

3.70.090    Prohibited acts and penalties.

3.70.100    Civil fraud.

3.70.110    Tax lien.

3.70.120    Interest on unpaid tax.

3.70.130    Taxpayer, licensee, or other person remedies.

3.70.140    Inspection and maintenance of documents and records.

3.70.150    Administrative regulations.

3.70.160    Confidentiality of records.

3.70.010 Applicability, purpose and authority.

A. Applicability. Unless provided otherwise, this chapter shall apply to the taxation of all marijuana cultivated within the borough for commercial or retail sale purposes, including marijuana cultivated by a standard marijuana cultivation facility and a limited marijuana cultivation facility.

B. Purpose. The purpose of this chapter is to provide for the levy of an excise tax on marijuana cultivated within the borough by any marijuana cultivation facility, and the enforcement of such tax.

C. Authority. This chapter and the regulations related to marijuana establishments herein are adopted pursuant to the authority granted by AS 17.38.100 and 29.35.010(6). [Ord. FY2017-27 §2, 2017].

3.70.020 Definitions.

“Flower and bud” means the hairy, sticky, or crystal-covered parts of mature female marijuana plants generally harvested for their high potency content.

“Marijuana” has the meaning given in AS 17.38.900.

“Marijuana cultivation facility” has the meaning given in AS 17.38.900 and includes both a standard marijuana cultivation facility and a limited marijuana cultivation facility as licensed under 3 AAC 306.300.

“Marijuana product manufacturing facility” has the meaning given in AS 17.38.900.

“Marijuana testing facility” has the meaning given in AS 17.38.900.

“Ownership change” means:

1. If the licensee is a partnership, including a limited partnership, any change in the identity of the partners, or in the ownership percentages held by any partners;

2. If the licensee is a limited liability company, any change in the identity of the members, or in the ownership percentage held by any member; or

3. If the licensee is a corporation, any sale of corporate stocks to a person not currently an owner, or any change of the percentage ownership of an existing shareholder.

“Retail marijuana store” has the meaning given in AS 17.38.900.

“Transfer” means the exchange of marijuana, as defined under AS 17.38.900, with or without consideration, or by barter, between marijuana establishments, or within marijuana establishments possessing multiple permits, for commercial purposes. [Ord. FY2017-27 §2, 2017].

3.70.030 Excise tax on marijuana.

A. The borough hereby levies an excise tax on all marijuana cultivated in any facility licensed pursuant to 3 AAC 306.300, including standard marijuana cultivation facilities, and limited marijuana cultivation facilities.

B. All nonexempt marijuana transferred from a marijuana cultivation facility shall be taxed as follows:

1. Any part of the flower and bud, as defined in 15 AAC 61.290, will be taxed, on a per-ounce basis, at a rate equal to 20 percent of any per-ounce excise tax imposed by the state of Alaska on the date of transfer pursuant to AS 43.61.010, or $10.00 per ounce, whichever is greater;

2. All remaining portions of the plant not included in subsection (B)(1) of this section will be taxed, on a per-ounce basis, at a rate equal to 20 percent of any per-ounce excise tax imposed by the state of Alaska on the date of transfer pursuant to AS 43.61.010, or $3.00 per ounce, whichever is greater.

C. A marijuana cultivation facility that is also licensed as a marijuana product manufacturing facility must pay tax on all marijuana transferred from the cultivation facility to the product manufacturing facility for the month in which the marijuana was transferred.

D. A marijuana cultivation facility that is also licensed as a retail marijuana store must pay tax on all marijuana transferred from the cultivation facility to the retail marijuana store for the month in which the marijuana was transferred. [Ord. FY2017-27 §2, 2017].

3.70.040 Exemptions.

A. The tax imposed under this chapter does not apply to marijuana if the state of Alaska prohibits the levying of this tax under AS 17.38.

B. Transfers to a licensed marijuana testing facility are exempt from the excise tax on marijuana. [Ord. FY2017-27 §2, 2017].

3.70.050 Tax returns.

A. On or before 30 days after the end of each month, licensees shall submit to the finance director a tax return, upon forms provided by the finance director, for each license, and submit payment for the taxes due as prescribed by the finance director.

B. The return shall be signed under penalty of perjury by the licensee or agent and shall include:

1. A copy of the tax return for that month submitted by the licensee to the Alaska Department of Revenue in accordance with 15 AAC 61.010;

2. The name and address of the licensee;

3. The name and address of the person filing the return, if different from the licensee;

4. The number of the zoning compliance permit issued under KIBC 17.15.060;

5. The name under which the marijuana cultivation facility is being operated;

6. A report setting forth the total amount of marijuana transferred from the marijuana cultivation facility in ounces, with fractional ounces calculated to the third decimal place, for the preceding month;

7. The amount of tax due;

8. Such other information and supporting documentation which may be required by the finance director.

C. A marijuana cultivation facility licensed under this chapter shall file a tax return by 30 days after the end of the previous month, even if it did not cultivate or transfer any marijuana in the borough during the preceding month.

D. The taxes imposed under this chapter and the return required by this section must be received by the finance director or postmarked within 30 days following the month covered by the return.

E. A separate tax return must be filed for each location when a taxpayer is operating in several locations within the borough. [Ord. FY2017-27 §2, 2017].

3.70.060 Involuntary returns.

If a licensee fails to file a return as required by this chapter, or when the finance director finds that a return is not supported by the records to be maintained pursuant to this chapter, the finance director may prepare and file a return on behalf of the licensee. Involuntary returns filed under this section may be premised upon any information that is available to the finance director, including, among other things, a copy of the materials the applicant submitted to the Alaska Department of Revenue in accordance with 15 AAC 61.010, and comparative data for similar businesses. A licensee for whom an involuntary return is filed under this section shall be subject to liability for the tax stated in the return, as well as subject to the penalties and interest provided for in this chapter. A return prepared by the finance director is prima facie, good and sufficient for all legal purposes. However, nothing prevents the licensee from presenting evidence on appeal to rebut the presumed sufficiency of a return prepared by the finance director, nor does the presumption of sufficiency alter the parties’ respective burdens of proof once the licensee has presented evidence to rebut that presumption. [Ord. FY2017-27 §2, 2017].

3.70.070 Amended tax returns.

A. Any tax return filed hereunder may be amended by the licensee within one year after the due date of the tax return being amended. No amendment by the licensee shall be allowed after this one-year period.

B. Any tax return prepared and filed by the finance director on behalf of the licensee may be amended by the licensee within one year of the date filed by the finance director. No amendment by the licensee shall be allowed after this one-year period. [Ord. FY2017-27 §2, 2017].

3.70.080 Application of payments.

Any payment submitted to the finance director for any taxes, penalties, interest, or cost due under any provision of this chapter or any return or any finding or determination by the finance director under this chapter shall be credited to the monthly tax period for which it was remitted, first to the payment of costs and then to penalties, interest, and taxes in that order. [Ord. FY2017-27 §2, 2017].

3.70.090 Prohibited acts and penalties.

A. No person shall operate a marijuana cultivation facility within the borough without complying with the provisions of this chapter.

B. A penalty of 10 percent of the taxes due shall be incurred automatically when a person fails to pay the full amount of the tax due under this chapter within seven calendar days following its due date.

1. The penalty shall be computed on the unpaid balance of the tax liability as determined by the finance director.

2. Notice of the penalties incurred and to be incurred shall be given to the person responsible for payment of the taxes or for filing the return or report when such tax payment or return or report is delinquent for seven calendar days after its due date.

3. The penalties provided for in this section shall be in addition to all other penalties and interest provided for under this chapter.

C. If a properly filed amended return reduces the total tax liability or the tax required to be paid, or the determent reduces the tax liability, the related penalty will be reduced accordingly.

D. All penalties and remedies enumerated in this chapter are cumulative.

E. Unless otherwise provided in this section, any person who violates or fails to comply with the provisions of this chapter shall be personally liable for all costs, interests, penalties and taxes due under this chapter plus a penalty equal to 12 percent of the tax due. For good cause shown, the finance director may waive or reduce all or part of any penalty imposed under this subsection. [Ord. FY2017-27 §2, 2017].

3.70.100 Civil fraud.

A. A civil fraud penalty may be assessed against a person in addition to a penalty for failure to file or failure to pay.

B. If it is determined by the finance director that a tax deficiency or part of a tax deficiency is due to fraud, then a penalty will be added to the tax. The penalty is 50 percent of the deficiency due or $500.00, whichever is greater. The penalty is computed on the total amount of the deficiency due.

C. Fraud is the intentional misrepresentation of a material fact with the intent to evade payment of tax which the person is believed to owe. The person must have had knowledge of its falsity and intended that it be acted upon or accepted as the truth.

D. To establish civil fraud, the finance director must prove by clear and convincing evidence that:

1. The tax liability was understated; and

2. The understatement was the result of an intent to evade tax.

E. An intent to evade tax may be demonstrated by any relevant evidence, including but not limited to the following:

1. The person has provided false explanations regarding understated or omitted amounts of marijuana cultivated or transferred;

2. The person has provided falsified or incomplete source documents;

3. The person has not justified an omission or understatement of a significant amount of marijuana cultivated or transferred;

4. The person has substantially overstated a deduction and has failed to justify the overstatement. [Ord. FY2017-27 §2, 2017].

3.70.110 Tax lien.

A. If any person who is liable to pay a tax or license fee under this chapter neglects or refuses to pay the tax or licensee fee after demand, the amount, including interest, additional amounts, or assessable penalty together with costs, is a lien in favor of the borough upon all property and rights to property, real or personal, belonging to that person.

B. The lien imposed by this section arises upon delinquency and continues until the amount is paid or a judgment against the person arising out of the liability is satisfied.

C. A lien arising out of a tax due under this chapter, including the penalties and interest on the tax, shall be prior, paramount, and superior to all other liens, mortgages, hypothecation, conveyances, and assignments, upon all real and personal property of the person liable for the tax and upon all the real and personal property used with the permission of the owner to carry on the business which is subject to the tax.

D. The lien on personal and real property may be enforced in a manner similar to that provided by AS 29.45.300 through 29.45.480 for enforcement of real and personal property tax liens. [Ord. FY2017-27 §2, 2017].

3.70.120 Interest on unpaid tax.

In addition to any penalties imposed by this chapter, interest at the rate of 12 percent per annum shall be charged on the unpaid balance of delinquent taxes. [Ord. FY2017-27 §2, 2017].

3.70.130 Taxpayer, licensee, or other person remedies.

A. Any person aggrieved by any action of the finance director in issuing, suspending, revoking, or refusing to issue any license under this chapter or in fixing the amount of taxes, penalties, interest, or costs under this chapter may apply to the borough clerk and request a hearing within 30 days from the date the finance director mails the notice of the finance director action. Upon timely application under this subsection for a hearing, the assembly shall hold a hearing to determine whether a correction is warranted. Hearings before the assembly under this subsection may, at the option of the assembly, be conducted by an administrative hearing officer designated by the assembly. The hearing officer shall conduct the hearing and prepare findings and conclusions. These findings and conclusions must be forwarded to the assembly for adoption, rejection, or modification and issuance of a final order or decision by the assembly. An application for a hearing must notify the borough clerk of the specific action complained of and amount of tax, interest, cost, or penalty contested and the reason it is contested. After receipt of a written decision by the assembly, a person may appeal to the Superior Court of the Third Judicial District in accordance with the Alaska Appellate Court rules. The person shall be given access to the department’s file in the matter for preparation of the appeal.

B. A request for appeal is filed on the date it is personally delivered, or is delivered to the borough clerk by the United States Postal Service, the date of the postmark stamped on the properly addressed cover in which the request is mailed. If the due date falls on Saturday, Sunday, or a borough observed holiday, the due date is the next working day. A current mailing address must be provided to the borough clerk with the request for appeal, and any change in mailing address after the request for appeal is filed must be reported to the borough clerk.

C. If the notice to the person pursuant to subsection A of this section shows an amount due, the uncontested portion of the amount due must be paid within 30 days after the date of the notice. If the uncontested amount is not paid within 30 days, collection action will be taken on that amount even if the person has filed a request for appeal. Payment of the total amount due may be made any time before the hearing. If the finance director has reason to believe that collection of the total amount due might jeopardize by delay, immediate payment of the total amount will be demanded and the finance director may pursue any collection remedies provided by law. Payment in full does not affect the person’s right to a hearing.

D. If a person requests a hearing and fails to appear at the hearing, the assembly or hearing officer may issue a decision without taking evidence from that person, unless that person shows reasonable cause for failure to appear within seven days after the date scheduled for the hearing.

E. Taxes, license fees, penalties and interest declared to be due in the final administrative decision must be paid within 30 days after the date of the decision, or a bond must be filed with the court in accordance with the Alaska Court Rules of Appellate Procedures. [Ord. FY2017-27 §2, 2017].

3.70.140 Inspection and maintenance of documents and records.

A. Marijuana cultivation facilities shall keep complete and accurate records to support the information to be included in the monthly tax returns required by this chapter, including information regarding transfers. The records must include an accounting that inventories live plants, trimmings, and any dried product on the first and last day of each month including:

1. An invoice, sales receipt or other record memorializing the transfer of marijuana from a marijuana cultivation facility, which must separately state the amount of tax due after the sale or transfer.

B. Any person selling marijuana at a retail marijuana store who cannot produce records showing taxes were paid on any marijuana in their possession are secondarily liable for the unpaid tax on marijuana.

C. Persons subject to the chapter shall keep such other documents and records as the finance director prescribes.

D. The finance director may, after 24-hour notice and during business hours, enter the business premises of a licensee under this chapter, so far as it may be necessary for the purpose of examining such products and the related business records. [Ord. FY2017-27 §2, 2017].

3.70.150 Administrative regulations.

The finance director may adopt policies and procedures providing for the application and interpretation of this chapter and provide forms for reporting and collecting the tax imposed by this chapter. [Ord. FY2017-27 §2, 2017].

3.70.160 Confidentiality of records.

A. All tax returns, documents, records, and/or reports filed with the borough pursuant to this chapter and all data obtained from tax returns, documents, records, and/or reports are confidential as provided by KIBC 2.40.100 and may not be released for inspection by any person except the licensee, mayor, treasurer, borough attorney, or the assembly; provided, however, that such data may be released upon court order.

B. It is the duty of the borough clerk to safely keep tax returns, documents, records, and/or reports and all data thereof secure from public and private inspection except as provided by this chapter.

C. This section does not prohibit the borough from compiling and publishing statistical analysis concerning the data submitted; provided, that no identification of particular tax returns, documents, records, and/or reports is made. Nothing in this section shall be deemed to prohibit the internal auditor from examining the tax returns, documents, records, and/or reports; provided, that no information obtained from specific or identified tax returns shall be made available to persons other than those authorized to review them under subsection A of this section. [Ord. FY2017-27 §2, 2017].