California city OKs tax rates for marijuana

A marijuana plant is shown at Oaksterdam University, a trade school for the cannabis industry, in Oakland, California July 23, 2009.

SAN FRANCISCO (Reuters) - Anticipating California voters will back a November ballot measure to legalize casual marijuana use, officials in Oakland have approved two tax rates on pot sales in their city, already a hub of the state's medicinal marijuana scene.

Oakland's city council on Monday night approved the rates -- a 5 percent gross receipts tax on licensed marijuana growers and on businesses selling marijuana for medical purposes, and a 10 percent rate on sales of marijuana used for recreational purposes.

California voters in 1996 approved a measure allowing marijuana use for medical purposes and would legalize its recreational use if they approve Proposition 19 in November.

The measure would allow marijuana possession for personal use and would authorize local governments to issue permits for pot production and sales and to tax it under state law. Selling marijuana would remain illegal under federal law.

While the vote by Oakland's city council marks another step in the city toward bringing marijuana into the mainstream, pot dispensaries that have proliferated in the city near San Francisco are worried a 5 percent levy is too high and that neighboring Berkeley will undercut it with a lower rate.

"Why go to Oakland when you can go to Berkeley and get the same thing cheaper?" Dale Sky Clare, a spokeswoman for Proposition 19 and executive chancellor for Oaksterdam University, a cannabis industry training school with campuses in Oakland, elsewhere in California and Flint, Michigan, said on Tuesday.

"It's important Oakland stay competitive with nearby markets. We're not operating in a vacuum," she said.

Federal authorities have not aggressively interfered with sales of medicinal marijuana sales in California.

(Editing by Kenneth Barry)