City of San Jose v. MediMarts, Inc.Annotate this Case
MediMarts, a nonprofit collective, paid the Marijuana Business Tax (MBT) for a year, then began submitting returns showing no money due. The City of San Jose sent notices and found that MediMarts owed $58,788.53 as of August 2012, plus future penalties and interest. MediMarts owed $215,111.17 as of November 2013. The city sued MediMarts and its president, Armstrong, for $767,058.60. Defendants filed a cross-complaint under 42 U.S.C. 1983 and 1988, arguing that payment of the MBT would subject them to self-incrimination because it “forces [defendants] to admit to the sale or possession for sale of marijuana.” The tax also violated defendants’ due process rights by failing to provide for notice or a hearing before declaring MediMarts a nuisance and forcing it to cease operations. Armstrong was not afforded a hearing on his personal liability for the taxes. Finally, the cross-complaint alleged that the MBT “unjustly treats collectives and medical marijuana patients differently from other similarly situated individuals and organizations.” Applying the “collective entity rule,” the court determined that neither MediMarts nor Armstrong was entitled to assert the Fifth Amendment to resist the tax. The court of appeal affirmed. Neither assertion of Armstrong’s constitutional rights nor their accommodation would abate MediMarts’s duty to pay the tax.