Customers of Harborside Health Center in Oakland weren’t the only people distressed by the federal government’s announcement last week that it intends to shut down the nation’s largest medical marijuana dispensary.

City officials were lamenting the possible loss of more than a million dollars in annual sales tax generated by the pot shop. Harborside paid $1.1 million in taxes to Oakland in 2011 and paid a total of $3.5 million in state and local taxes last year on sales of $22 million, not counting payroll taxes.

That’s a lot of money for a cash-strapped city like Oakland that already has to repay $21 million in redevelopment funds to the state and is struggling with cuts in essential services. Oakland revenue administrator Dave McPherson said 2.5% of the $54 million in business taxes collected by the city comes from dispensaries.

Medical marijuana sales have generated about $100 million in annual state sales tax, according to Board of Equalization member Betty Yee. 

Time Magazine ran a story in 2009 headlined, “Can Marijuana Help Rescue California’s Economy?” in which it cited estimates from the U.S. Department of Agriculture that marijuana—“California’s biggest cash crop” —generated sales of $14 billion a year. That was nearly double the state’s second largest agricultural commodity, dairy products.

The story speculated about what life would be like if California passed the nation’s first decriminalization law (it didn’t) and pointed out that U.S. Attorney General Eric Holder was not opposed to medical marijuana, legal in California since 1996. Holder had announced that states should be allowed to make their own rules for medical marijuana and federal raids on pot dispensaries would cease.

That was then. It’s not that way now. Federal authorities under Holder’s direction are spearheading a campaign to shut down the medical marijuana industry in California, busting dispensaries, pressuring credit card companies not to do business with them and making life difficult for the industry in myriad ways.    

On July 10, U.S. Drug Enforcement Administration agents tacked notices of forfeiture to doors at Harborside’s facilities in Oakland and San Jose, and U.S. Attorney Melinda Haag said the center’s status as a “superstore” increased the likelihood that it would be shut down. 

Harborside offers free yoga and acupuncture to its 1,100 regular customers, along with 40 strains of marijuana, bongs and hemp fedoras, as well as holistic services and classes, lab analysis and a library. It also provides “care packages to patients unable to afford their medicine.”

The center was the subject of a four-part reality-series on the Discovery Channel last year called “Weed Wars.” The first episode featured a fight between Harborside and Oakland’s Business Tax Board of Review.

Some in the medical marijuana industry were horrified. William Panzer, a lawyer who represents Bay Area pot shops, said, “I think they’re absolutely nuts. I think they risk getting shut down.”

Soon after the series ended, Harborside was hit with a $2.5 million bill from the Internal Revenue Service. The Justice Department crackdown started shortly thereafter.

–Ken Broder

To Learn More:

Oakland Protests U.S. Attorney's Crackdown on Large Medical Marijuana Dispensary (by Lee Romney, Los Angeles Times)

Customers Flock to Marked Pot Dispensary in San Jose and Oakland (by Matthew Artz, Oakland Tribune)

Can Marijuana Help Rescue California's Economy? (by Alison Stateman, Time magazine)

Feds Send California's Legal Pot Dispensaries Up In Smoke (by Robert W. Wood, Forbes)

Oakland Gets a Reality TV Close Up: “Weed Wars” (by Zusha Elinson, The Bay Citizen)