By Ted Shorack

The Bulletin

LA PINE — The City Council voted unanimously Wednesday to repeal a sales tax on medical marijuana dispensaries with a lawsuit looming from one of the businesses within the city.

Green Knottz, a dispensary in La Pine, filed suit against the city Dec. 2, stating that the 5 percent tax couldn’t be enforced because it doesn’t comply with state law.

Leland Berger, a Portland attorney representing the dispensary, said the decision by the La Pine City Council effectively makes the suit now unnecessary. His clients, dispensary owners Don and Randy Huff, will likely choose to have the suit dismissed.

The city had collected about $6,000 in taxes from two medical marijuana dispensaries located in La Pine. That revenue will now be returned to the dispensaries, which will be required to send it to medical marijuana patients who paid it.

The City Council briefly discussed the ordinance establishing the tax, which was passed in October 2014, the month before Oregon voters approved legalizing recreational marijuana under Measure 91. City councilors Wednesday decided hashing out the legality of the tax in court would be costly to La Pine taxpayers.

“We need to do what’s best for the city,” said Councilor Karen Ward. “We need to not use taxpayers’ money on something that down the road is going to take another turn possibly.”

Councilor Stu Martinez said, “I think our best course is to repeal it at this time.” He added that he would like to see the tax money returned to medical marijuana patients.

Mayor Ken Mulenex said when the city approved the tax last year it was doing so under certain assumptions at the time.

“We as a council moved forward on certain ideas about what we could do or shouldn’t do,” Mulenex said. “I’m proud of the council for making those kind of decisions that we operated under at that time.”

Jeremy Green, the city’s attorney, told the City Council the costs of a legal battle over the tax would likely far exceed the revenue that’s been collected so far.

“I believe it comes down to a prudent and sound business decision,” said Green.

The City Council also heard from Sean O’Day, an attorney for the League of Oregon Cities.

O’Day said he believed the city could make two arguments supporting the tax based on language in House Bill 3400. The law was signed by Gov. Kate Brown in June and attached additional framework to Measure 91 and the Oregon Medical Marijuana Act.

The law prohibits a tax on medical and recreational marijuana. But O’Day said the section regarding the tax didn’t distinguish medical from recreational.

“This pre-emption is just found in the recreational part,” said O’Day. “It is a rational inference that the Legislature pre-emption only refers to the recreational.”

Matt Toepfer — owner of High Desert Botanicals, the second dispensary in La Pine — told the City Council the medical tax has greatly impacted business.

“We decided not to put the tax on our patients because they were outraged when we told them 5 percent would go toward a city tax,” Toepfer said.

He added sales are very limited compared to Bend.

“There’s a good chance that we could shut our doors because we don’t have enough people.”

The city previously decided to opt out of allowing medical marijuana dispensaries to sell pot temporarily to recreational users, which began Oct. 1.

At a meeting in January, the City Council expects to consider whether to refer a ban on recreational marijuana businesses within La Pine to the voters.

As of Monday, 62 Oregon cities and counties had banned recreational marijuana growing and sales, according to the Oregon Liquor Control Commission. Twenty-six of those have referred the issue to voters.

— Reporter: 541-617-7820,