12-A — Bellflower City Council, May 11, 2026

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12-A

TO: Honorable Mayor and Members of the City Council

FROM: Anna Garan, Director of Finance

SUBJECT: Consideration and possible action to conduct a public hearing to consider The Medicine Woman Group, LLC’s appeal of the Tax Administrator’s final determination related to the audit of dispensary operations for calendar years 2022–2024.

DATE: May 11, 2026

EXECUTIVE SUMMARY

The Medicine Woman Group, LLC (“Taxpayer”) has appealed the Tax Administrator’s Administrative Decision, which upheld a revised cannabis business tax assessment for the Taxpayer’s dispensary operations for calendar years 2022 through 2024. The audit was conducted primarily during the second half of 2025, with the original audit report finalized in November 2025 and distributed to all active dispensary permittees in December 2025. Permittees were provided an opportunity to review and respond to the audit findings prior to finalization.

The Taxpayer was given the opportunity to be heard at an administrative hearing on February 24, 2026, and to submit additional documentation, which the City reviewed.

Following this process, the Tax Administrator issued a final determination affirming the audit findings, with adjustments primarily related to delivery fee calculations based on the supplemental records.

The appeal contests the inclusion of (1) amounts labeled as “City Cannabis Tax” and (2) revenues from non-cannabis sales in taxable gross receipts.

RECOMMENDATION TO CITY COUNCIL

1) Open the public hearing; take testimonial and documentary evidence; and, after considering the evidence, uphold the Tax Administrator’s Administrative Decision dated April 15, 2026, in full, confirming that all assessed taxes, penalties, interest, and audit costs are due and payable; and

2) Direct staff to proceed with all authorized collection and enforcement actions if payment is not remitted promptly; or

3) Alternatively, discuss and take other action related to this item.

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stafJeport

Staff Report – The Medicine Woman Group, LLC’s Appeal of Tax Administrator’s Final Determination Related to the Audit of Dispensary Operations for Calendar Years 2022–2024
May 11, 2026

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FISCAL IMPACT

The total outstanding amount resulting from the audit of the Taxpayer’s dispensary operations for calendar years 2022 through 2024 is $57,957.01. This amount consists of $60,985.42 in tax, $12,892.93 in penalties, $13,925.66 in interest, $9,000.00 for the Taxpayer’s proportionate share of audit examination costs and is net of the $38,847 payment made in January 2026.

The increase in interest of $2,900.90 reflects additional accrual resulting from the Taxpayer’s failure to remit the assessed amount within 10 business days of the tax assessment letter. The original interest calculation included in the Tax Administrator’s letter was accrued only through November 2025, when the audit report was finalized; interest is now calculated through May 2026.

BACKGROUND AND DISCUSSION

The City conducts periodic cannabis business tax audits, generally every three years, covering the preceding three calendar years of operations. The purpose of each audit is to assess compliance with the City’s cannabis tax pursuant to Bellflower Municipal Code (BMC) § 3.37. The most recent prior audit of this Taxpayer, conducted in 2023 for calendar years 2019 through 2021, identified similar issues, including the exclusion of amounts labeled “City Cannabis Tax” collected from purchasers and delivery fees from taxable gross receipts. The Taxpayer subsequently paid the additional amounts due as a result of those audit findings in 2023.

The current audit covering calendar years 2022 through 2024 was conducted during the second half of 2025. The audit report was finalized in November 2025 and distributed to all active dispensary permittees in December 2025. Permittees were directed to remit any resulting liabilities by January 9, 2026, which coincided with the 2026 cannabis permit renewal deadline, for administrative efficiency.

On January 9, 2026, the Taxpayer submitted a payment which, consistent with City policy and prior notice to the Taxpayer, was applied first to outstanding tax liabilities, penalties, and interest resulting from the audit. As a result, the 2026 cannabis permit fee and other outstanding obligations remained unpaid.

On January 30, 2026, the City Attorney’s Office issued a formal demand for payment requiring satisfaction of all outstanding permit fees, audit liabilities, and delinquent taxes by February 9, 2026. The Taxpayer remitted only the permit and other permit-related fees, and an administrative hearing was initially scheduled for February 17, 2026, but was continued to February 24, 2026 at the Taxpayer’s request.

The Taxpayer disputed portions of the audit findings, presented evidence at the administrative hearing, and was granted the opportunity to submit supplemental documentation afterward, which was fully considered.

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Staff Report – The Medicine Woman Group, LLC’s Appeal of Tax Administrator’s Final Determination Related to the Audit of Dispensary Operations for Calendar Years 2022–2024
May 11, 2026

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BACKGROUND AND DISCUSSION – Continued

The Tax Administrator issued a final determination affirming the audit with minor adjustments, primarily related to delivery fee revenue based on supplemental records.

The original audit report included estimated delivery revenues because the Taxpayer did not provide the requested documentation or clarification by the established audit deadline.

The determination addressed three issues: (1) inclusion of amounts labeled “City Cannabis Tax” in gross receipts, (2) reporting of delivery fees, and (3) inclusion of non- cannabis sales in taxable gross receipts. The Taxpayer appeals issues (1) and (3) to the City Council.

With respect to the first issue on appeal, the record shows that the Taxpayer collected amounts from customers identified as “City Cannabis Tax” but excluded those amounts from reported gross receipts. The Taxpayer contends these amounts are excludable under BMC § 3.37.020 as taxes required by law to be included in or added to the purchase price and collected from the consumer, or amounts collected on behalf of others where the business is acting as an agent or trustee.

The determination concludes these amounts are properly included in taxable gross receipts because the City’s cannabis business tax is imposed directly on the operator as a tax on the privilege of conducting commercial cannabis activity, not on the consumer.

Unlike state sales tax or the cannabis excise tax, the City Cannabis Tax is not required by law to be passed through to customers or separately stated on receipts. Accordingly, the Taxpayer’s decision to itemize and collect a “City Cannabis Tax” charge does not alter its character as a business-level tax obligation or convert it into a pass-through tax.

Instead, amounts collected under this label represent consideration received in the course of business operations and are includable in gross receipts under the BMC.

The “agent or trustee” exclusion also does not apply. The Taxpayer is not collecting funds on behalf of a third party but is recovering its own tax obligation as the licensed permittee.

Because no agency or fiduciary relationship exists under the ordinance, the statutory exclusion is inapplicable.

With respect to non-cannabis items, the second issue on appeal, the determination finds that receipts from these sales are properly included in taxable gross receipts. The cannabis business tax is imposed on the privilege of operating a commercial cannabis business as a whole, rather than on individual product categories.

Under BMC § 3.37.020, “commercial cannabis business” is defined to include any commercial activity relating to cannabis, including without limitation the selling of cannabis and ancillary products and accessories, whether conducted for gain or profit. Section

3.37.020 states in relevant part as follows:

"Cannabis business" or "commercial cannabis business"
means any commercial business activity relating to cannabis including, without limitation, cultivating, transporting, distributing, manufacturing, compounding, converting, processing, preparing, storing, packaging, delivering, and selling (wholesale and/or retail sales) of cannabis and any ancillary products and accessories in the City, whether or not carried on for gain or profit.
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Staff Report – The Medicine Woman Group, LLC’s Appeal of Tax Administrator’s Final Determination Related to the Audit of Dispensary Operations for Calendar Years 2022–2024
May 11, 2026

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BACKGROUND AND DISCUSSION – Continued

"Gross receipts,"
except as otherwise specifically provided, means the total amount actually received or receivable from all sales; the total amount or compensation actually received or receivable for the performance of any act or service, of whatever nature it may be, for which a charge is made or credit allowed, whether or not such act or service is done as a part of or in connection with the sale of materials, goods, wares or merchandise; discounts, rents, royalties, fees, commissions, dividends, and gains realized from trading in stocks or bonds, however designated. Included in "gross receipts" is all receipts, cash, credits and property of any kind or nature, without any deduction there from on account of the cost of the property sold, the cost of materials used, labor or service costs, interest paid or payable, or losses or other expenses whatsoever, except that the following is excluded:

1. Cash discounts where allowed and taken on sales;

2. Credit allowed on property accepted as part of the purchase price and which property may later be sold, at which time the sales price is included as gross receipts;

3. Any tax required by law to be included in or added to the purchase price and collected from the consumer or purchaser;

4. Such part of the sale price of any property returned by purchasers to the seller as refunded by the seller by way of cash or credit allowances or return of refundable deposits previously included in gross receipts;

5. Receipts from investments where the holder of the investment receives only interest and/or dividends, royalties, annuities and gains from the sale or exchange of stock or securities solely for a person's own account, not derived in the ordinary course of a business;

6. Receipts derived from the occasional sale of used, obsolete or surplus trade fixtures, machinery or other equipment used by the taxpayer in the regular course of the taxpayer's business;

7. Whenever there are included within the gross receipts amounts which reflect sales for which credit is extended and such amount proved uncollectible in a subsequent year, those amounts may be excluded from the gross receipts in the year they prove to be uncollectible; provided, however, if the whole or portion of such amounts excluded as uncollectible are subsequently collected they are included in the amount of gross receipts for the period when they are recovered;

8. Receipts of refundable deposits, except that such deposits when forfeited and taken into income of the business must not be excluded when in excess of one dollar ($1.00);

9. Amounts collected for others where the business is acting as an agent or trustee and to the extent that such amounts are paid to those for whom collected. These agents or trustees must provide the finance department with the names and the addresses of the others and the amounts paid to them. This exclusion does not apply to any fees, percentages, or other payments retained by the agent or trustees.

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Staff Report – The Medicine Woman Group, LLC’s Appeal of Tax Administrator’s Final Determination Related to the Audit of Dispensary Operations for Calendar Years 2022–2024
May 11, 2026

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BACKGROUND AND DISCUSSION – Continued

This interpretation is further supported by City policy clarifying the scope of taxable operations. As reflected in the City’s Administrative Policy and Procedure No. 3 (as amended and ratified by the City Council in Resolution No. 22-18), businesses engaged in qualifying cannabis-related retail activity are subject to the cannabis tax on their entire gross receipts when their cannabis-related sales exceed 50% of total gross receipts. The policy explicitly recognizes that once a business meets this threshold and is classified as operating within the cannabis sector for tax purposes, the tax applies to all receipts of the business, including non-cannabis merchandise such as apparel or accessories, because those revenues are generated through and in connection with the cannabis business operation.

Accordingly, receipts from non-cannabis items are properly included in taxable gross receipts because they are part of the total revenue derived from the Taxpayer’s commercial cannabis business activities and are not subject to any applicable exclusion under BMC § 3.37.020.

Staff concludes that the Tax Administrator’s Determination Letter is legally sound, supported by substantial evidence, and consistent with the Bellflower Municipal Code.

ATTACHMENTS

Appeal of Administrative Decision ................................................................................... 6 Response to Appeal of Administrative Decision ............................................................ 15 Tax Administrator’s Determination Letter ...................................................................... 21 The Medicine Woman Group, LLC Audit Report dated April 14, 2026 .......................... 25 Payment Demand and Notice of Suspension Letter dated January 30, 2026 ............... 33 The Medicine Woman Group, LLC Request for Hearing dated February 5, 2026 ......... 37 Notice of Tax Assessment Hearing for February 17, 2026 dated February 5, 2026 ...... 39 Hearing Extension Request Dated February 13, 2026 .................................................. 52 Notice of Tax Assessment Hearing for February 24, 2026 ............................................ 53 Agenda Item 14-C, Resolution No. 22-18
Ratifying Administrative Policies and Procedures No. 3 – Cannabis Tax Application to Sale of Industrial Hemp-Derived Monies ....................................................................... 54 - 5 -

LAW OFFICES OF

JENNIFER MCGRATH
9114 Adams Avenue #264, Huntington Beach, CA 92646
714.231.2124 | [email protected]
City of Bellflower April 19, 2026
Attn: Mayra Ochiqui, City Clerk via email only at 16600 Civic Center Drive [email protected]
Bellflower CA 90706
RE: Appeal of Administrative Decision Following Tax Assessment Hearing for the Audited Period (Calendar Years 2022–2024) dated April 15, 2026 Dear Ms. Ochiqui:

On February 24, 2026, the City of Bellflower (the “City”) held an administrative hearing regarding a tax audit assessment involving The Medicine Woman Group, LLC (the “Taxpayer”) pursuant to Chapter 3.37 of the Bellflower Municipal Code (“BMC”). The City had conducted an audit of the Taxpayer’s records and determined there were unpaid taxes pursuant to the City’s cannabis tax requirements. The Taxpayer challenged portions of the audit findings at the hearing and presented documentation, testimony and argument in support of its position. At the conclusion of the hearing, the Taxpayer requested an opportunity to present additional documentation for the City’s consideration, which was granted.

On April 15, 2026, The Medicine Woman Group, LLC, received the Tax Administrator’s Decision. This letter constitutes an appeal to the City Council of that Decision and/or the Failure of the Tax Administrator to grant an exemption pursuant to BMC 3.37.180(B).

Said hearing to be scheduled within 30 days. BMC 3.37.180(C).

Although there is no BMC code requirement to state the grounds for the hearing, The Medicine Woman felt it would better serve both the City and The Medicine Woman to detail the reasons for this appeal.

This appeal is based on the attached Objection To Tax Assessment; Hearing Brief By The Medicine Woman Group, LLC submitted to the Tax Administrator for consideration at the assessment hearing of February 24, 2026. Specifically, The Medicine Woman is appealing the Tax Administrator’s Decision on two issues:
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1. Amounts Collected By TMW From Its Customers For The City's Cannabis Tax Should Not Be Included In Taxable Gross Receipts As Specific Exemptions Under BMC 3.37.020 defining "gross receipts" apply; and

2. Sales of Non-Cannabis Items Should Not be Subject to the City Cannabis Tax Pursuant to BMC 3.3.180(C), The Medicine Women Group, LLC may present such relevant evidence it may have relating to the determination from which the appeal is taken.

We look forward to the hearing before the City Council.

Sincerely,
~~"1r(7Ttr'o/MTfl
Jennifer McGrath, Esq.

I, Charis Burrett, Chief Executive Officer, The
this request for hearing submitted on beh
Charis Surrett
Attachment:

Objection To Tax Assessment; Hearing Brief By The Medicine Woman Group, LLC Cc:

Berger, Kart H. ([email protected])
Tim Campen ([email protected])
Solange Fortenbach ([email protected])
Ryan Smoot ([email protected])
Anna Garan ([email protected])
Wangsu Lee ([email protected])
•

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OBJECTION TO TAX ASSESSMENT; HEARING BRIEF BY THE MEDICINE WOMAN GROUP, LLC - 1
JENNIFER McGRATH (SBN 179917) EDWARD PINCHIFF (SBN 137183) Law Offices of Jennifer McGrath
9114 Adams Ave., #264
Huntington Beach, CA 92646
Phone: (714) 231-2124
Attorneys for

THE MEDICINE WOMAN GROUP, LLC

CITY OF BELLFLOWER
In the Matter of the Bellflower City Tax
Assessment against

THE MEDICINE WOMAN GROUP, LLC
dba The Medicine Woman,
OBJECTION TO TAX ASSESSMENT;

HEARING BRIEF BY THE MEDICINE

WOMAN GROUP, LLC
Date: February 24, 2026
Time: 1:00 p.m.

Place: Bellflower City Hall
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OBJECTION TO TAX ASSESSMENT; HEARING BRIEF BY THE MEDICINE WOMAN GROUP, LLC - 2
I. INTRODUCTION
A. Parties
The Medicine Woman Group, LLC (“TMW”) is a California Limited Liability Company operating a licensed cannabis dispensary located at 9058 Rose Street, Bellflower, California. Its CEO is Charis Burrett.

The City of Bellflower (the “City” or “Bellflower”) is a municipal corporation located in southeastern Los Angeles County, California. The City was a general law City until Bellflower Measure B was approved by voters in November 2024 establishing Bellflower as a charter city.

B. Procedural History
This matter arises from a tax assessment against Medicine Woman Group, LLC by the City’s administrator. The Bellflower Municipal Code (“BMC”) defines the administrator as the “city manager, or designee.” (BMC § 3.37.020) The tax assessment is for alleged unpaid taxes pursuant to BMC § 3.37.120, et seq. That assessment is the result of the City’s cannabis tax examination audit for the period from January 1, 2022, through December 31, 2024.

As a result of that tax examination, the City issued a Cannabis Tax Report of Examination (“Tax Report”) dated November 24, 2025. The tax examiner for the City was Chris Wills. The Tax Report states that during this period, TMW reported $10,017,465 in Gross Receipts and remitted $851,485 in cannabis tax to the City. The Tax Report determined that an additional cannabis tax liability existed primarily comprised of two issues.

The first issue identified in the Tax Report was that TMW charged and collected the City’s Cannabis Tax from their customers and did not report those amounts as taxable gross receipts.

The second issue in the Tax Report was that TMW charged its customers a delivery fee on transactions that are delivered to their customers and did not report those amounts as gross receipts to the City. The City contends that these two items should have been reported as gross receipts to the City pursuant to the BMC 3.37.020 definition of gross receipts.

TMW contends that the amounts TMW charged and collected from its customers for the City’s Cannabis Tax should not be included in gross receipts and that to do so amounts to a “tax on tax” which is inappropriate, unlawful, and unfair.
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OBJECTION TO TAX ASSESSMENT; HEARING BRIEF BY THE MEDICINE WOMAN GROUP, LLC - 3
TMW also contends that it properly included delivery fees in gross receipts. With respect to the amount of the delivery fees, the tax examiner did not have records showing actual delivery fees for the audit period, so the tax examiner estimated monthly delivery fees based on a prior audit. TMW contends that the estimated amounts are not correct as TMW ceased doing deliveries for nearly all of the audit period.

The Tax Report also applies the City Cannabis Tax to non-cannabis items. TMW contends that non-cannabis sales are not subject to the City Cannabis Tax and the tax assessment should be modified to reflect as such.

The Tax Report includes a finding that TMW owes the City an additional $67,709.76 in local cannabis taxes. It also includes a finding that TMW owes penalties of $13,985.46 and interest of $11,514.97. The total of these amounts is $93,210.19. TMW disagrees with these findings.

As a result of the alleged underpaid taxes, the City also claims that TMW owes an additional amount of $9,000.00 for the cost of the tax examination pursuant to BMC 3.16.130.

TMW objects to this charge as it contends there was no underpayment of taxes exceeding 2% and asserts that it should not have to pay any amount for the cost of the tax examination. TMW also objects to this charge as the City has not provided documentation establishing what the tax examination costs were for the third party conducting the audit, Avenu Insights & Analytics, LLC, or the fair share of costs TMW should be expected to pay (Avenu Insights & Analytics was retained by the City to provide examinations/audits for multiple cannabis dispensaries.) The City and TMW disagree on whether the City has issued a proper tax assessment to TMW. The City’s Director of Finance, Anna Garan, sent an email dated December 11, 2025, indicating that the City’s auditor completed its review and identified $93,210.19 in underpaid taxes including penalties and interest. It also indicated that TMW’s share of the audit costs is $9,000. TMW’s position is that this email was not a proper notice of assessment by the City as it did not comply with the procedures set forth in BMC 3.37.150 which provides that formal notice of any tax assessment be mailed by the administrator to TMW with details of the assessment and the time and place where the assessment may be contested at least 10 days before a hearing on - 10 -

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OBJECTION TO TAX ASSESSMENT; HEARING BRIEF BY THE MEDICINE WOMAN GROUP, LLC - 4
the assessment. That was not done. The December 11, 2025, email from Anna Garan, Director of Finance, was not mailed, does not contain the requisite information, and there was no hearing providing an opportunity for interested parties to object. Once that hearing takes place, then the assessment, decision, or administrative ruling may be appealed to the City Council under BMC

3.37.180.

After being notified that TMW did not acknowledge December 11, 2025, email as proper notice of a tax assessment pursuant to the BMC, the City unilaterally set a tax assessment hearing for February 17, 2026. That hearing was then continued by agreement of the parties to February 24, 2026.

TMW objects to the tax assessment by the City and asserts that it does not owe any additional cannabis taxes, penalties, or interest. TMW also objects to the December 11, 2025, email as proper notice of a tax assessment and contends the City has failed to date to issue a proper notice.

II. LEGAL ARGUMENT
The primary issue before the City administrator is whether to confirm or modify the tax assessment. (BMC § 3.37.150)
A. Amounts Collected by TMW from its Customers for the City’s Cannabis Tax Should Not be Included in Taxable Gross Receipts
TMW collected the City Cannabis Tax for the City from its customers. The tax was included on the customer receipt as required by CDTFA regulations as the City Cannabis Tax amount is necessary to compute the state cannabis excise tax and sales tax. (See 18 CCR § 3802.) California Department of Cannabis Control regulations also require that all taxes be stated on the receipt. (See 4 CCR §15420(a)(8).)
Pursuant to BMC § 3.37.020, the definition of “gross receipts” has several exemptions from that definition. Exemption #3 excludes from gross receipts “Any tax required by law to be included in or added to the purchase price and collected from the consumer or purchaser;” and Exemption #9 excludes “Amounts collected for others where the business is acting as an agent or trustee and to the ex-tent [sic] that such amounts are paid to those for whom collected.” - 11 -

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OBJECTION TO TAX ASSESSMENT; HEARING BRIEF BY THE MEDICINE WOMAN GROUP, LLC - 5
As to Exemption #3, CDTFA regulations and DCC regulations require the City Cannabis Tax to be included in or added to the purchase price and collected from the consumer or purchaser. Consequently, the City Cannabis Tax should not be included in the BMC definition of “gross receipts.”
As to Exemption #9, the City Cannabis Tax was collected (by TMW) for others (the City) where the business (TMW) is acting as an agent or trustee (for the City) and such amounts were paid (by TMW) to those for whom collected (the City). Indeed, at a February 9, 2026, meeting between the parties addressing the tax assessment, the attorney for the City acknowledged that TMW collects the City Cannabis Tax from the consumer on behalf of the City. Consequently, the City Cannabis Tax should not be included in the BMC definition of “gross receipts.” B. Amounts Collected by TMW from its Customers for Delivery Fees Are Not Accurately Reflected in the Tax Assessment
TMW will show at the hearing that delivery fees collected by TMW from its customers were reported in gross receipts and the tax assessment delivery fee numbers are wrong. As to the amount of the delivery fees, the tax examiner did not have records showing actual delivery fees for the audit period, so the tax examiner estimated monthly delivery fees based on a prior audit.

Those estimates are not accurate. TMW will show at the hearing the true amount of the actual delivery fees collected, which are minimal for the audit period as TMW ceased deliveries for nearly all of the audit period.

C. Sales of Non-Cannabis Items Should Not be Subject to the City Cannabis Tax The City Staff Report dated October 10, 2016 (City Council Agenda Item 11D), states, in relevant part that “[t]he primary purpose of this program is to generate revenue for the City's General Fund. Preliminary estimates suggest the City may receive between $1.8 million and $3.4 million in annual revenue (cannabis business tax and sales tax) from the first full year of issuing 12 permits to 2023-24, respectively, when all the proposed tax rates are fully phased in prior to subsequent annual CPI adjustments.” TMW does not dispute that non-cannabis items are subject to the sales tax under BMC 3.04.
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OBJECTION TO TAX ASSESSMENT; HEARING BRIEF BY THE MEDICINE WOMAN GROUP, LLC - 6
However, BMC 3.37.020 defines "Tax," "cannabis tax," "business tax," or commercial marijuana tax" to mean the tax due pursuant to this chapter for engaging in commercial cannabis business in the City. Therefore, TMW does contend that non-cannabis items are not subject to the Cannabis Business Tax under BMC 3.37.060(D). Non-cannabis items include, but are not limited to, branded clothing such as t-shirts, shorts, socks, hats, hoodies, winter caps, child- resistant storage containers, pouches, and bags. None of which are subject to the CDTFA cannabis excise tax. (See 18 CCR § 3802).

The October 2016 Staff Report further states that “Of greatest interest to the City is the proposed tax that would be imposed for the privilege of operating a Cannabis Operation within Bellflower' s jurisdiction.” All discussion before the City Council in considering the marijuana tax measure in October and November 2016 emphasized “a tax on cannabis related businesses.” The ballot language for the Bellflower cannabis tax initiative (Measure B) approved by voters in March 2017 reiterated the same message. Shall the proposition imposing a tax on cannabis related businesses operating within the City of Bellflower be adopted? (emphasis added) Moreover, neither the impartial analysis nor the ballot arguments dissuaded the voter from believing the taxation was on cannabis. There is no language in the Staff Reports or ballot materials that would educate a voter that a cannabis related business would be subject to the standard sales and use tax similar to any other non-cannabis retail business but also penalized with an additional cannabis tax rate on non-cannabis goods because the t-shirt is sold in the same retail business as cannabis. In short, the “privilege” has become a penalty.

If it was the intent of the voters that non-cannabis goods would be subject to a cannabis business tax, the initiative could have explicitly said so. If it was the intent of the City Council that non-cannabis goods would be subject to a cannabis business tax, the BMC could have explicitly said so. They do not.

California courts consistently hold that an ambiguity in a tax statute will generally be resolved in favor of the taxpayer. In re Transient Occupancy Tax Cases (2016) 2 Cal. 5th 131, 134. See also Microsoft Corp. v. Franchise Tax Bd. (2006) 39 Cal.4th 750, 759; Agnew v. State Bd. of Equalization (1999) 21 Cal.4th 310, 330.
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OBJECTION TO TAX ASSESSMENT; HEARING BRIEF BY THE MEDICINE WOMAN GROUP, LLC - 7
TMW will show at the hearing the true amount of the cannabis sales vs. non-cannabis sales.

TMW contends that non-cannabis sales are not subject to the Cannabis Business Tax and the tax assessment should be modified to reflect as such.

III.CONCLUSION
Based on the foregoing, it is respectfully submitted that the administrator should modify the tax assessment to reflect that no additional taxes, interest, or penalties are due from TMW and to reflect that TMW does not owe any amount for the cost of the tax examination.

DATED: February 17, 2026 _____________________________________ Jennifer McGrath
Attorneys for THE MEDICINE WOMAN GROUP, LLC
Jennifer McGrath
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Sonny R. Santa Ines
Mayor
Victor A. Sanchez
Mayor Pro Tem
Ray Dunton
Council Member
Dan Koops
Council Member
Wendi Morse
Council Member

1 April 28, 2026

VIA EMAIL AND U.S. MAIL

Jennifer McGrath, Esq.

Law Offices of Jennifer McGrath
9114 Adams Avenue #264
Huntington Beach, CA 92646
[email protected]

RE: Response to Appeal of Administrative Decision Following Tax Assessment Hearing The Medicine Woman Group, LLC (Calendar Years 2022–2024); Demand for Payment

Dear Ms. McGrath:

A copy of your correspondence dated April 19, 2026 and April 22, 2026 was forwarded to my attention (“April Correspondence”). In part, the April Correspondence seeks confirmation that the Tax Administrator’s Determination Letter of April 15, 2026 (the “Determination Letter”) is not final and that the assessed amount of $93,903.11 is not due and payable pending resolution of the appeal.

The City will schedule a hearing before the City Council within the time frame prescribed by the BMC. However, the City cannot confirm that the obligation to pay the assessed amount is suspended during the pendency of the appeal. To the contrary, as set forth below, the full amount of $55,056.11 (net of payment received to date) remains due and payable, and the City may pursue all available enforcement remedies in the event of non-payment.

This letter also responds to the substantive arguments raised in TMW’s Objection to Tax Assessment and Hearing Brief dated February 17, 2026, which was attached to and incorporated by reference in your April 19, 2026 appeal letter. The City’s position on each issue is as follows.

Ø The Payment Obligation Is Not Stayed by the Filing of an Appeal The Determination Letter constitutes the Tax Administrator’s final determination following the administrative hearing held on February 24, 2026, and the subsequent review of all documentation submitted for consideration. While TMW may appeal that determination to the City Council under BMC § 3.37.180, nothing in BMC Chapter 3.37 provides that the filing of an appeal operates as an automatic stay of the payment obligation or suspends the City’s enforcement authority. The assessed amount therefore remains due and payable by the stated deadline.
e ch e
The City of Bellflower
?a.mi.lies. 2'3usinesses. 9ulures.
16600 Civic Center Drive, Bellflower, CA 90706
Tel .562.804.1424 Fax .562.92.5.8660 www.bellflower.org

Sonny R. Santa Ines
Mayor
Victor A. Sanchez
Mayor Pro Tem
Ray Dunton
Council Member
Dan Koops
Council Member
Wendi Morse
Council Member

2 Pursuant to BMC § 3.37.140, taxes that are not received by the administrator on or before the due date are delinquent and subject to penalties and interest. Interest continues to accrue at the rate of 0.75% per month on the delinquent amount until paid. In addition, BMC Chapter 3.37 authorizes the administrator to record a certificate with the County Recorder specifying the delinquent tax amount, which upon recording constitutes a lien on all real property owned by the taxpayer. The City may also pursue enforcement actions against TMW’s cannabis business permit under Title 14 of the BMC.

TMW is strongly encouraged to remit payment of the full assessed amount to avoid further accrual of additional penalties and interest and to preserve the status of its cannabis business permit. The current tax assessment includes interest accrual only through November 2025, which is the finalization date of the original audit report. Should the City Council grant the appeal in whole or in part, the City will issue a refund of any overpaid amount consistent with the refund provisions of BMC § 3.37.170.

Ø Response to TMW’s Substantive Arguments on Appeal
The Tax Administrator’s Determination Letter thoroughly addressed each of the arguments raised by TMW at the February 24, 2026 hearing and in its supplemental submissions. The City’s position on each issue remains as set forth in the Determination Letter. Nevertheless, given that TMW’s appeal incorporates by reference the Objection to Tax Assessment and Hearing Brief previously submitted, the City provides the following response to each of TMW’s principal arguments.

A. Amounts Collected from Customers as “City Cannabis Tax” Are Properly Included in Gross Receipts

TMW contends that amounts it collected from customers and identified on receipts as “City Cannabis Tax” should be excluded from gross receipts under two exemptions in the BMC §

3.37.020 definition of “gross receipts”: (1) Exemption #3, which excludes “[a]ny tax required by law to be included in or added to the purchase price and collected from the consumer or purchaser”; and (2) Exemption #9, which excludes “[a]mounts collected for others where the business is acting as an agent or trustee and to the extent that such amounts are paid to those for whom collected.”

Both arguments fail as a matter of law.

Exemption #3 does not apply because the City’s cannabis tax under BMC § 3.37.060(D)(1) is a direct tax on the business for the privilege of conducting commercial cannabis operations within the City. It is not a tax imposed on the consumer or purchaser. Unlike state sales tax or the state cannabis excise tax, the City Cannabis Tax is not legally required to be passed through to the purchaser, and there is no statutory obligation to separately state it on customer receipts. The fact e cE e
Th e Cit y of Bellflower
9aniilies. 2'3usinesses. 9ulures.
16600 Civic Center Drive, Bellflower, CA 90706
Tel .562 .804.1424 Fax .562.92.5 .8660 www.bellflower.org

Sonny R. Santa Ines
Mayor
Victor A. Sanchez
Mayor Pro Tem
Ray Dunton
Council Member
Dan Koops
Council Member
Wendi Morse
Council Member

3 that TMW voluntarily chose to collect this amount from its customers and itemize it on receipts does not transform a privilege tax on the business into a pass-through tax on the consumer. When TMW collects the tax from customers and lists it on receipts, those amounts constitute part of TMW’s gross receipts for purposes of calculating the cannabis tax.

This position is consistent with the treatment of local cannabis business taxes throughout the State of California for the calculation of the 15% excise tax and sales tax. The California Department of Tax and Fee Administration (“CDTFA”) has expressly stated that “[a]ny cannabis business tax included on the receipt to the customer is considered part of gross receipts unless otherwise excluded” under the Revenue and Taxation Code (see, CDTFA, Gross Receipts Subject to Cannabis Excise Tax (L-931), fn. 1). The CDTFA’s guidance further confirms that local cannabis business taxes passed on to customers are included in gross receipts subject to both the state cannabis excise tax and sales tax.

TMW’s reliance on CDTFA regulations (18 CCR § 3802) and Department of Cannabis Control regulations (4 CCR § 15420(a)(8)) requiring that taxes be stated on customer receipts is misplaced. Those state regulations govern the format of receipts for purposes of calculating state excise taxes and sales taxes; they do not control the City’s definition of “gross receipts” under the BMC nor do they convert the City Cannabis Tax from a privilege tax on the business into a pass-through tax on the consumer.

Exemption #9 likewise does not apply. TMW is not acting as an “agent or trustee” when it collects the City Cannabis Tax from its customers. The tax obligation is TMW’s own; it is imposed directly on the cannabis business, not on the customer. TMW’s decision to pass this cost to customers is a business decision, not a legal obligation arising from an agency or trust relationship. Because TMW is satisfying its own tax obligation — not collecting on behalf of a third party for whom it acts as agent — the exemption is inapplicable.

Accordingly, all monies received from customers, including amounts identified on receipts as “City Cannabis Tax,” constitute gross receipts under BMC § 3.37.020, and the Tax Administrator’s determination on this issue is correct.

B. Delivery Fees Have Been Properly Adjusted Based on TMW’s Own Records

TMW argued at the hearing that the delivery fee amounts in the original audit report were inaccurate because the auditor had estimated monthly delivery fees based on a prior audit in the absence of actual records. The City acknowledges this concern and notes that the Tax Administrator addressed it directly in the Determination Letter.

Following the hearing, TMW provided supplemental point-of-sale documentation, delivery and transaction logs, and a declaration substantiating its delivery fee revenue. The City’s auditor e cs e
The City of Bellflower
9aniilies. 2'3usinesses. 9ulures.
16600 Civic Center Drive, Bellflower, CA 90706
Tel .562.804.1424 Fax .562.92.5.8660 www.bellflower.org

Sonny R. Santa Ines
Mayor
Victor A. Sanchez
Mayor Pro Tem
Ray Dunton
Council Member
Dan Koops
Council Member
Wendi Morse
Council Member

4 reviewed this additional documentation and verified that a portion of delivery fees had, in fact, been included in TMW’s reported gross receipts. Accordingly, the audit assessment was adjusted to reflect that only $4,750 in delivery fees was not reported on TMW’s returns to the City. This adjustment was incorporated into the revised audit report and reflected in the total assessment.

There is no dispute that delivery fees constitute gross receipts under BMC § 3.37.020, which broadly defines gross receipts to include “the total amount or compensation actually received or receivable for the performance of any act or service, of whatever nature it may be, for which a charge is made or credit allowed.” Delivery services provided in connection with cannabis transactions are part of TMW’s commercial operations, and the associated fees are properly included in gross receipts. TMW’s argument that the delivery fee figures were inaccurate has already been addressed through the adjustment reflected in the Determination Letter, and no further modification is warranted.

C. Sales of Non-Cannabis Items Are Subject to the Cannabis Tax

TMW contends that receipts from sales of non-cannabis items — including branded clothing, child-resistant containers, pouches, and bags — should not be subject to the City Cannabis Tax under BMC § 3.37.060(D). This argument is not supported by the plain language of the ordinance.

BMC § 3.37.020 defines “cannabis business” or “commercial cannabis business” to mean “any commercial business activity relating to cannabis including, without limitation, cultivating, transporting, distributing, manufacturing, compounding, converting, processing, preparing, storing, packaging, delivering, and selling (wholesale and/or retail sales) of cannabis and any ancillary products and accessories in the City, whether or not carried on for gain or profit.” The tax is imposed on the business activity as a whole — it is a tax on the privilege of operating a commercial cannabis business, not a product-specific excise tax. Gross receipts therefore include all receipts generated from operations conducted as part of TMW’s cannabis business, including the sale of non-cannabis items such as branded merchandise and accessories.

TMW argues that legislative history and ballot materials demonstrate that the voters intended the tax to apply only to cannabis products. This argument is unavailing. The plain language of the ordinance is clear and unambiguous: the definition of “commercial cannabis business” expressly includes the sale of “ancillary products and accessories.” Where the text of a statute is clear, courts need not resort to extrinsic aids of interpretation (Lungren v. Deukmejian (1988) 45 Cal.3d 727). The ballot language asked voters whether a “tax on cannabis related businesses” should be adopted — the word “businesses” encompasses the entire operation, not merely the sale of cannabis products.

e cq e
The City of Bellflower
?a.mi.lies. 2'3usinesses. !7-ulures.
16600 Civic Center Drive, Bellflower, CA 90706
Tel .562 .804.1424 Fax .562 .92.5 .8660 www.bellflower.org

Sonny R. Santa Ines
Mayor
Victor A. Sanchez
Mayor Pro Tem
Ray Dunton
Council Member
Dan Koops
Council Member
Wendi Morse
Council Member

5 TMW’s reliance on the principle that ambiguities in tax statutes are construed in favor of the taxpayer does not assist its position because there is no ambiguity to construe. The definition of “commercial cannabis business” is broad and explicit and includes the sale of ancillary products.

Moreover, the California Supreme Court has held that while ambiguities in tax statutes are construed against the taxing authority, the statute must be ambiguous before this canon applies (Agnew v. State Bd. of Equalization (1999) 21 Cal. 4th 310). Here, the BMC’s definition is not ambiguous.

Further, the fact that non-cannabis items may not be subject to the CDTFA cannabis excise tax under 18 CCR § 3802 is irrelevant to the City’s local cannabis business tax. The state cannabis excise tax and the City’s cannabis business tax are distinct taxes with distinct legal bases, distinct definitions of the tax base, and distinct administering authorities. State regulatory provisions governing the computation of the state excise tax do not control the City’s definition of gross receipts or the scope of the City’s cannabis business tax.

Accordingly, the Tax Administrator’s determination that receipts from all sales — including non-cannabis items — conducted as part of TMW’s cannabis business operations are included in gross receipts is correct.

Ø Demand for Payment
Based on the foregoing, the City demands that TMW remit the full assessed amount of $55,056.11 (net of payment received to date) without further delay. This amount reflects the tax due of $60,985.42, penalties of $12,892.93 pursuant to BMC § 3.37.140(B), and interest of $11,024.76 pursuant to BMC § 3.37.140(E), as set forth in the revised audit report, and is net of the payment made on January 9, 2026, totaling $38,847. Additionally, interest will accrue at the rate of 0.75% per month on the unpaid tax amount from the calculation date of the Determination Letter until payment is made. As outlined in the tax determination letter and the revised audit report, the current amount due reflects interest calculated only through November 2025, the date of the original audit report. In addition, the City has assessed TMW $9,000.00 for its proportionate share of the audit examination costs pursuant to BMC § 3.37.260, which amount is also due and payable.

Be advised of the following consequences of continued non-payment:

1. Additional Penalties and Interest. All unpaid amounts will continue to accrue interest at 0.75% per month until paid.

2. Lien Authority. The City may record a certificate of tax lien with the Los Angeles County Recorder specifying the delinquent amount, which upon recording constitutes a lien on all real property owned by TMW.
e c. e
The City of Bellflower
!7-aniilies. 2'3usinesses. !7-ulures.
16600 Civic Center Drive, Bellflower, CA 90706
Tel .562.804.1424 Fax .562.92.5.8660 www.bellflower.org

Sonny R. Santa Ines
Mayor
Victor A. Sanchez
Mayor Pro Tem
Ray Dunton
Council Member
Dan Koops
Council Member
Wendi Morse
Council Member

6 3. Permit Enforcement. The City reserves the right to pursue enforcement actions with respect to TMW’s cannabis business permit, including suspension or revocation, in accordance with Title 14 of the BMC.

4. Additional Civil Remedies. The City reserves all additional remedies available under the BMC and applicable law, including the right to pursue collection of the delinquent tax as a civil debt.

We urge TMW to remit the full assessed amount immediately to avoid further accrual of penalties and interest and to preserve the status of its cannabis business permit. Payment should be directed to the City of Bellflower Finance Department at City Hall, 16600 Civic Center Drive, Bellflower, CA 90706.

Very truly yours,

Karl H. Berger
City Attorney

c: City Manager
Finance Director
Assistant City Attorney

e GM e
The City of Bellflower
!Ja01.i.f.ies. 2'3us.inesses. !7-ulures.
16600 Civic Center Drive, Bellflower, CA 90706
Tel .562 .804.142 4 Fax .56 2.92.5 .8660 www.bellflower.org

April 15, 2026

The Medicine Woman Group, LLC
9058 Rose Street
Bellflower, CA 90706

Re: Administrative Decision Following Tax Assessment Hearing for the Audited Period (Calendar Years 2022–2024)

This matter comes before the City of Bellflower (the “City”) following an administrative hearing held on February 24, 2026 regarding a tax audit assessment involving The Medicine Woman Group, LLC (the “Taxpayer”) pursuant to Chapter 3.37 of the Bellflower Municipal Code (“BMC”).

The City conducted an audit of the Taxpayer’s records and determined there were unpaid taxes pursuant to the City’s cannabis tax requirements. The Taxpayer challenged portions of the audit findings at the hearing and presented documentation, testimony and argument in support of its position. At the conclusion of the hearing, the Taxpayer requested an opportunity to present additional documentation for the City’s consideration, which was granted by me as the Tax Administrator and fully considered.

This Administrative Decision constitutes the Tax Administrator’s final determination based on the audit record, applicable law, and the materials and arguments submitted both at and after the hearing. In reviewing the audit, the Tax Administrator considered whether the assessment is supported by substantial evidence and consistent with the requirements of the BMC. The three primary issues at the hearing were the Taxpayer’s exclusion of the following items from its reported taxable gross receipts to the City: (1) amounts collected from customers identified as “City Cannabis Tax,” (2) delivery fees, and (3) receipts from sales of non-cannabis items.

Following the hearing, the Taxpayer provided supplemental point-of-sale (POS) documentation relating to delivery fee revenue that had not been submitted by the deadline established during the audit. In the absence of this information, the audit initially relied on reasonable estimates.

Upon review of the subsequently submitted documentation, the City’s auditor reviewed the presented financial data and adjusted the Taxpayer’s liability accordingly.

With respect to the first issue, the record shows that the Taxpayer collected amounts from customers identified as “City Cannabis Tax” but excluded them from reported gross receipts. The Taxpayer contends that these amounts are excludable under BMC § 3.37.020 either as (1) taxes required by law to be included in or added to the purchase price and collected from the consumer or purchaser, or (2) amounts collected for others where the business is acting as an agent or trustee and to the extent that such amounts are paid to those for whom collected.

However, under BMC § 3.37.060(D)(1), every person engaged in commercial cannabis business activities within the City must pay an annual commercial cannabis tax. The responsibility to pay this tax falls on the Taxpayer, not the customer. Unlike state sales or excise taxes, the City Cannabis Tax is not legally required to be passed through to the purchaser, and there is no obligation to separately state it on receipts. If the Taxpayer chooses to collect this tax from customers and list it on receipts, those amounts are included as part of the Taxpayer’s gross receipts for purposes of calculating the City Cannabis Tax.

- 21 -
The City of Bellflower
!7-ami/ie . :73usine ·se . !Ju l ures.
16600 ivic Center Drive, ellflower, A 907 6
Tel 562.804.14.24 Fax 5 62 .925.8660 www.bellflowetorg ....._ ____ >

The Medicine Woman Group, LLC
Re: Administrative Decision Following Tax Assessment Hearing for the Audited Period (Calendar Years 2022–2024)

Page 2 of 4 ends

The exclusions cited by the Taxpayer do not apply. The tax is not imposed on the purchaser by law, such as with the State excise tax, so the exclusion for taxes collected from the purchaser is inapplicable. Similarly, the exclusion for amounts collected on behalf of others does not apply because the Taxpayer is not acting as an agent or trustee, but is instead satisfying its own tax obligation. State regulatory provisions regarding the disclosure of taxes on receipts do not control the City’s definition of gross receipts and are not relevant because the tax is imposed on the Taxpayer, not required to be collected from the customer. All monies received from customers, excluding mandatory passthrough taxes, are part of gross receipts pursuant to the BMC.

Accordingly, amounts identified as “City Cannabis Tax” meet the definition of the City’s taxable gross receipts.

With respect to the second issue, the audit determined that the Taxpayer charged delivery fees but did not include all such amounts in the reported gross receipts to the City. Delivery services provided in connection with cannabis transactions are part of the Taxpayer’s commercial operations, and the associated fees constitute gross receipts under BMC § 3.37.020. During the initial review, the City’s contracted auditor found that delivery fees appear on customer receipts, but no corresponding amounts are reflected in the point-of-sale (POS) transaction detail. The Taxpayer did not timely respond to the original audit request for supporting documentation to reconcile this discrepancy. Only after the audit did the Taxpayer submit point-of-sale (POS) records, supplemental delivery and transaction logs, and a declaration to substantiate the delivery fee revenue. Based on this additional information, the auditor was able to verify that a portion of the delivery fees had, in fact, been included in reported gross receipts for the audit period.

Accordingly, the audit assessment has been adjusted to show $4,750 in delivery fees was not reported on the Taxpayer’s returns to the City.

With respect to the third issue, the Taxpayer argues that receipts from sales of non-cannabis items should not be subject to the Cannabis Tax. This argument is not supported by the ordinance.

The Cannabis Tax is imposed on the privilege of operating a “Commercial Cannabis Business,” which is defined in BMC § 3.37.020 to expressly include sales relating to cannabis, including the sale of ancillary products and accessories. Section 3.37.020 states in relevant part as follows:

The Medicine Woman Group, LLC
Re: Administrative Decision Following Tax Assessment Hearing for the Audited Period (Calendar Years 2022–2024)

Page 3 of 4 ends

1. Cash discounts where allowed and taken on sales;

2. Credit allowed on property accepted as part of the purchase price and which property may later be sold, at which time the sales price is included as gross receipts;

3. Any tax required by law to be included in or added to the purchase price and collected from the consumer or purchaser;

6. Receipts derived from the occasional sale of used, obsolete or surplus trade fixtures, machinery or other equipment used by the taxpayer in the regular course of the taxpayer's business;

8. Receipts of refundable deposits, except that such deposits when forfeited and taken into income of the business must not be excluded when in excess of one dollar ($1.00);

Accordingly, the tax applies to the business activity as a whole rather than to individual product categories. Gross receipts therefore include all receipts generated from operations conducted as part of the Taxpayer’s cannabis business, including sales of non-cannabis items. While the Taxpayer references staff reports and ballot materials, those sources do not support Taxpayer’s contentions or override the plain language of the ordinance. Accordingly, receipts from non- cannabis sales meet the definition of the City’s taxable gross receipts.

Based on the foregoing, the City determines that amounts identified as “City Cannabis Tax” are included in gross receipts, delivery fee revenue is adjusted to $4,750, and receipts from non- cannabis sales are included in gross receipts. The audit assessment is therefore affirmed as modified.

- 23 -

- 24 -
The Medicine Woman Group, LLC
Re: Administrative Decision Following Tax Assessment Hearing for the Audited Period (Calendar Years 2022-2024)

Page 4 of 4 ends

As a result of the City's analysis of Taxpayer's additional evidence presented, the Taxpayer's original liability of $102,210.19 has now been revised to $93,903.11, consisting of $60,985.42 in tax, $12,892.93 in penalties, $11,024.76 in interest (calculated through November 2025), and $9,000.00 in audit costs.1
This Administrative Decision constitutes the Tax Administrator's final administrative determination with respect to the audit period identified above. Payment of the total amount due is required within 10 business days from the date of this letter to avoid revocation of the current cannabis permit.

Sincerely,
• fltt 1MN'r-
Anna Garan
Finance Director
Enclosure: Revised Audit Report dated April 14, 2026
cc: Ryan Smoot, City Manager
Wangsu Lee, Assistant to the City Manager
Karl Berger, City Attorney
Timothy Campen, Assistant City Attorney
Christopher W. Wills, Audit Manager
1 The City incurred $45,000 in audit costs for four dispensaries and one distribution activity. Pursuant to Section

3.37.260 where an audit identifies an understatement of 5% or more, the taxpayer is responsible for the reasonable cost of the audit and all resulting taxes, penalties, and interest. Accordingly, one-fifth of the audit cost or $9,000 has been allocated to the Taxpayer.

City of Bellflower, California
Cannabis Tax
Report of Examination

REVISED

April 14, 2026

The Medicine Woman Group, LLC
d/b/a The Medicine Woman

Examination Period:

January 1, 2022, through December 31, 2024

Finance Department
City Hall
16600 Civic Center Drive
Bellflower, California 90706

Examination Performed by:

Audit Division/Compliance Section
Avenu Insights & Analytics, LLC
600 Beacon Parkway West, Ste. 900
Birmingham, AL 35209

- 25 -

Avenu Insights & Analytics, LLC
Audit Division
d/b/a: The Medicine Woman Page 2

Business Name: The Medicine Woman Group

Location: 9058 Rose Street, Bellflower, CA 90706

Date of Audit: June 19, 2025

Examiner: Chris Wills

Audit Commentary:

The Medicine Woman Group, LLC d/b/a The Medicine Woman, hereinafter referred to as “TMW”, is a cannabis dispensary located at 9058 Rose Street, Bellflower, California. TMW is owned by Charis Burrett (50%) and Damian Collins (50%). Brandon Scadron and Roy Woo represented the dispensary during the onsite visit. Mr. Woo and Mr. Scadron presented the records for review. Records were received electronically after the walk-through of the dispensary and were reviewed at Avenu's office.

The scope of the examination was to determine TMW’s compliance with the City’s cannabis tax pursuant to Bellflower City Code § 3.37 et seq. and their compliance with applicable State and Local Laws and Guidelines for the operation of a cannabis dispensary. The review period for the cannabis tax examination is January 1, 2022, through December 31, 2024. During this period, TMW reported $10,017,465 in Gross Receipts and remitted $851,485 in cannabis tax.

Current Methods:

Purchasing Process & Inventory Handling Procedures:

Mr. Scadron has been tasked with the responsibility of making all inventory purchases for the facility. Inventory is purchased, as needed, through licensed vendors. TMW pays their vendors either by check or the use of automated clearing house (“ACH”) transfers. Each inventory shipment includes a certificate of analysis, shipping manifest, and purchase invoice.

Upon arrival, the delivery driver signs in with the front desk prior to being allowed into the facility. Either Mr.

Scadron or another manager is called to meet the driver in the waiting area. After the driver is met, they are instructed on where to bring the new inventory into the facility. Inventory is received in a back office/receiving area by the manager, at which point the items are inspected to confirm that all packages are properly sealed and match the manifest details. After the manifest details are confirmed, the manifest is accepted in the State’s tracking system, METRC. Once accepted in METRC, the manifest is automatically synced with TMW’s POS/track and trace system, Treez, and the inventory count is updated to reflect the new product. Once accepted into Treez, a unique barcode is assigned to the products and stickers are printed and placed on the products for tracking purposes. The selling price for each of the new inventory items is set and matched to the barcode before the inventory is either placed in the showroom or placed into their inventory storage room.

A full inventory count is conducted annually by the staff, with cycle counts being completed weekly. Cycle counts consist of pulling certain categories of product, such as flower, extracts, pre-rolls, edibles, etc., and counting those items individually. Both the cycle count and the full inventory count are completed by exporting the expected inventory levels from Treez, which present the current levels in real time, and scanning the barcodes to make sure the quantities match. If discrepancies are discovered the product is recounted and a manager researches the issue if it is still present after the recount. If the discrepancy cannot be accounted for, an adjustment is entered into Treez, which also reports to the State through METRC. Reason codes are required to finalize an adjustment within METRC. At the end of the day, inventory on the showroom floor is locked in their - 26 -

Avenu Insights & Analytics, LLC
Audit Division
d/b/a: The Medicine Woman Page 3

cabinets/display cases and backstock items are locked in large safes in limited access areas. Only a select few personnel have access to the backstock safe and limited access areas.

Customer Check-in/verification Procedures:

Customers are welcomed at the front desk by security, where they are required to present their identification, such as a driver’s license, and their medical recommendations (if available). In the case of a new customer, a new member profile is created for them in Treez by entering their information from their driver’s license, scanning to get the customer picture, and entering a telephone number. If a customer presents a doctor’s recommendation, the recommendation is verified and scanned into the system. The customer's recommendation is saved to their profile during the initial account set up, afterwards the recommendation is not needed for return visits until the recommendation expires. Returning customers are verified/checked in by scanning the barcode on the back of the customer's ID which automatically pulls up the customer's profile. After being checked in, the customer is placed in the “queue” for the next available budtender, i.e. sales associate, to help them. TMW tries to maintain a 1-to-1 ratio, meaning one customer (or group) to one budtender. Once inside the facility, customers are greeted by a budtender to discuss their needs and is provided consultation regarding available products that meet those needs. Budtenders access customer information in real time via Treez to make sure they do not exceed the maximum amount of cannabis legally allowed based on whether the customer is a medical or adult use customer.

Sales and Cash Handling Procedures:

TMW has two types of customers, pick-up/delivery and in-store purchases. Pick-up/delivery customers order their products online. If the customer selects pick-up, they will come to the store to pick up their order once they are notified it is ready. Customers that select delivery will have their purchase delivered to them by a TMW employee. In-store customers have their transactions completed in the POS system, Treez, by scanning the barcode on the product(s) that are being purchased by the customer. TMW provides an ATM to their in-store customers so that they can withdraw cash to complete their purchase. TMW fills the ATM machine from cash on hand. Customers are charged a fee to withdraw cash from the ATM.

Budtenders are responsible for managing their own cash register and entering each transaction into Treez which accounts for all monies and inventory management. At the beginning of each day, each cash register till is supplied with cash and issued to a budtender. That budtender will be responsible for their till/cash register until the till is closed out. Tills are closed either at the end of the shift or on an as needed basis based on the amount of cash inside. At the end of the day/shift, the budtender will close out their cash drawer and hand it over to a closing manager to count out. The closing manager removes the deposit amount from the drawer, logs the amount in the system, and places the deposit (total cash minus start up amount) into their smart safe1. The smart safe is synced with their bank and presents a deposit log to TMW for their records. When all the drawers have been balanced, the closing manager will close out the daily sales and report the amounts to their accounting team.

Reporting:

TMW records all sales transactions in Treez2. Each customer receipt includes the price of the item(s) purchased as well as separately stated state and local taxes. Taxes listed out include sales tax at 10.25%, the City’s

1 Once the deposits go into the smart safe, liability of the money is shifted to the bank. The bank will send an armored truck around once a week, or as needed, to empty the safe.
2 Delivery fees charged to customers were not listed in the original POS reports provided by TMW. TMW requested the help of Treez to pull the delivery transactions so that applicable delivery fees could be presented for review. - 27 -

Avenu Insights & Analytics, LLC
Audit Division
d/b/a: The Medicine Woman Page 4

cannabis tax at 8.5%, and cannabis excise tax at 15%. At the end of each month, TMW generates a monthly sales summary report from Treez and sends it over to their accounting team to compare with the daily close out reports. At the end of the quarter, the quarterly gross receipts are totaled and reported to the City.

Audit Procedures and Testing Methodology:

Prior to the beginning of the examination, a letter of intent to audit was mailed by the City of Bellflower’s Finance Department. A preliminary interview was conducted by phone to introduce the auditor to the appropriate personnel at TMW and to familiarize the auditor with the products and services offered by the dispensary. An onsite visit was completed on June 19, 2025, during which the auditor reviewed the sales practices, customer check-in procedures, and inventory management procedures.

Documents reviewed included: Bellflower cannabis tax returns, Treez / POS monthly sales detail and summary reports, month/quarter end working papers, bank statement, inventory purchase logs, and sample customer receipts. Gross receipts from the POS sales reports were recalculated and compared to the working paper amounts to confirm the calculated taxable gross receipts. The bank statements were also reviewed to verify the amount of cash deposited did not exceed the amount reported to the City. Sample customer receipts were requested to confirm how TMW presented taxes to their customers and to reconcile the amounts listed in the sales reports. Inventory purchase logs were compared to the POS sales details to reconcile purchases with sales to confirm inventory levels were representative of the sales completed. Once the taxable gross receipt amounts were confirmed, they were reconciled to the cannabis tax returns to verify they were accurately reported to the City.

Avenu performed the following tasks to verify TMW’s adherence to California Health and Safety Code § 11018, § 11362.5, and § 11362.7 et seq. include:
• Walk Through of Customer Verification Process
• Walk Through of Vendor Verification Process

While onsite, a sample inventory count was conducted to verify if the inventory management function within Treez was functioning as it should. To complete this count, five (5) items were randomly selected to count and were compared with the inventory level in Treez. The table below details the brand, items selected, the available amount, and the counted total.

Brand Product Available
per Treez
Counted by
Auditor
St. Ides Purple Grape Tincture 9 9
Lost Farms Watermelon 18 18
Alpin Cannatonic 8 8
Pistil Whip Frozen Banana 8 8
Coastal Sun Tropicana Cherry 5 5

Applicable Sections of Law and Municipal Code:

Bellflower City Code § 3.37 et seq.

California Health and Safety Code § 11018, § 11362.5, and § 11362.7 et seq.

California Revenue and Taxation Code § 34010 - 34021.5
California Business and Professional Code § 26000 - 26231.2

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Avenu Insights & Analytics, LLC
Audit Division
d/b/a: The Medicine Woman Page 5

Audit Findings and/or Errors Discovered:

During the audit it was determined that a cannabis tax liability existed. The liability was comprised of primarily two issues. The first issue was that TMW charged and collected the City’s cannabis tax from their customers and did not report those amounts as taxable gross receipts. The City’s cannabis tax is a tax on the business for the privilege of conducting business within the City. The tax imposed by the City under Bellflower Municipal Code § 3.37 is a direct tax on the cannabis business rather than an indirect tax imposed on the consumer (such as sales tax and excise tax). Bellflower Municipal Code § 3.37.060 D.1 states that “every person who is engaged in business as a dispensary … in the City must pay an annual commercial cannabis tax”. Since the tax is levied on the business itself, if the amount is collected from the customer, that amount is considered gross receipts based on the broad definition thereof. In this instance, the tax was collected from the customers; therefore, the amounts collected should be included within the gross receipts reported to the City.

The second issue discovered was that TMW charged their customers a delivery fee on transactions that are delivered to their customers and did not report those amounts as gross receipts to the City. Pursuant to the City’s definition of gross receipts, amounts received for “the performance of any act or service” in which a charge is made is deemed to be included. Delivery fees are charged for the delivery service provided by TMW and therefore, should be included within the total gross receipts reported to the City. The delivery fees were not listed on the POS transactions provided; however, the fees were identified when reviewing a few sample receipts. The actual amount received for delivery fees for the audit period was requested from TMW. TMW provided a list of all delivery fees charged for the audit period in a declaration provided during the hearing.

Additional support was requested to confirm the amounts were listed accurately. Upon review of the additional support, it was determined that the amounts provided were reliable; therefore, those amounts have been incorporated into the results of the audit. The tables below breakdown the amounts reported to the City as well as the audited gross receipts.

Table 1 below details the audited gross receipts that should have been reported to the City for each reporting period.

Table 1- Audited Gross Receipts
Filing
Period
Calendar
Period
Net Sales Cannabis Tax
(City)
Delivery
Fees3
Audited Gross
Receipts
(a) (b) (c) (d)= (a) + (b) + (c)
2021-22-Q3 Jan-Mar: 2022 $1,017,738.11 $83,619.51 $4,750.00 $1,106,107.62 2021-22-Q4 Apr-Jun: 2022 $1,001,235.04 $82,200.62 $0.00 $1,083,435.66 2022-23-Q1 Jul-Sep: 2022 $935,267.94 $76,793.50 $0.00 $1,012,061.45 2022-23-Q2 Oct-Dec: 2022 $892,896.90 $72,949.47 $0.00 $965,846.37 2022-23-Q3 Jan-Mar: 2023 $842,697.17 $69,252.38 $0.00 $911,949.55 2022-23-Q4 Apr-Jun: 2023 $826,699.80 $67,954.96 $0.00 $894,654.76 2023-24-Q1 Jul-Sep: 2023 $787,645.39 $64,512.59 $0.00 $852,157.97 2023-24-Q2 Oct-Dec: 2023 $776,238.00 $63,092.04 $0.00 $839,330.04 2023-24-Q3 Jan-Mar: 2024 $751,090.06 $61,314.71 $0.00 $812,404.77 2023-24-Q4 Apr-Jun: 2024 $734,124.24 $61,024.64 $0.00 $795,148.87 2024-25-Q1 Jul-Sep: 2024 $690,890.11 $57,464.13 $0.00 $748,354.24 2024-25-Q2 Oct-Dec: 2024 $659,022.92 $54,466.22 $0.00 $713,489.15 Total Audited Gross Receipts $9,915,545.68 $814,644.76 $4,750.00 $10,734,940.44

3 In early 2022, TMW transitioned away from charging a delivery fee on their delivery services to be more competitive. Consequently, delivery fees were gradually discontinued so that the service was completed free of charge. Delivery services began to declin e around September 2022 and was completely phased out by November 2024. - 29 -

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Table 2 compares the amounts originally reported to the City by TMW to the audited gross receipts.

Table 2- Audit Results: City Cannabis Tax
Filing
Period
Calendar
Period
Gross Receipts
reported to City
Audited Gross
Receipts
Difference (Over)
/ Under Reported
Cannabis Tax (Over)
/ Under Paid
(a)(b)(c) = (b) – (a)(d) = (c) x 8.5%
2021-22-Q3 Jan-Mar: 2022 $1,112,641.97 $1,106,107.62 ($6,534.35) ($555.42) 2021-22-Q4 Apr-Jun: 2022 $1,098,685.73 $1,083,435.66 ($14,170.07) ($1,296.26) 2022-23-Q1 Jul-Sep: 2022 $1,031,208.79 $1,012,061.45 ($19,147.34) ($1,627.52) 2022-23-Q2 Oct-Dec: 2022 $858,229.02 $965,846.37 $107,622.35 $9,147.47 2022-23-Q3 Jan-Mar: 2023 $842,697.17 $911,949.55 $69,252.38 $5,886.45 2022-23-Q4 Apr-Jun: 2023 $799,470.06 $894,654.76 $95,184.70 $8,090.70 2023-24-Q1 Jul-Sep: 2023 $758,971.63 $852,157.97 $93,186.34 $7,920.84 2023-24-Q2 Oct-Dec: 2023 $742,259.00 $839,330.04 $97,071.04 $8,251.04 2023-24-Q3 Jan-Mar: 2024 $721,349.48 $812,404.77 $91,055.29 $7,739.70 2023-24-Q4 Apr-Jun: 2024 $735,124.24 $795,148.87 $60,024.63 $5,102.09 2024-25-Q1 Jul-Sep: 2024 $676,048.57 $748,354.24 $72,305.67 $6,145.98 2024-25-Q2 Oct-Dec: 2024 $640,779.11 $713,489.15 $72,710.04 $6,180.35 City Cannabis Tax Results $10,017,464.77 $10,734,940.44 $717,475.67 $60,985.42 Penalty and Interest:

Pursuant to Bellflower City Code § 3.37.140 B, if any cannabis tax is found to be delinquent, a total penalty amount of twenty percent (20%) is due on the amount owed. Additionally, Bellflower City Code § 3.37.140 E imposes interest in the amount of three-quarters of one percent (.75%) per month on the amount of cannabis tax found to be delinquent. Interest is calculated until the delinquent tax is paid. Table 3 below shows the calculation of penalty and interest owed per the additional tax due.

Table 3: Audit Results (Including Penalty and Interest) Filing
Period
Calendar
Period
Cannabis Tax Due Penalty- 20% Interest4 Total Due
(a) (b) = (a) * 20%(c) (d) = (a) + (b) + (c)
2021-22-Q3 Jan-Mar: 2022 ($555.42) $0.00 $0.00 ($555.42) 2021-22-Q4 Apr-Jun: 2022 ($1,296.26) $0.00 $0.00 ($1,296.26) 2022-23-Q1 Jul-Sep: 2022 ($1,627.52) $0.00 $0.00 ($1,627.52) 2022-23-Q2 Oct-Dec: 2022 $9,147.47 $1,829.49 $2,332.61 $13,309.57 2022-23-Q3 Jan-Mar: 2023 $5,886.45 $1,177.29 $1,368.60 $8,432.34 2022-23-Q4 Apr-Jun: 2023 $8,090.70 $1,618.14 $1,699.05 $11,407.89 2023-24-Q1 Jul-Sep: 2023 $7,920.84 $1,584.17 $1,485.16 $10,990.17 2023-24-Q2 Oct-Dec: 2023 $8,251.04 $1,650.21 $1,361.42 $11,262.67 2023-24-Q3 Jan-Mar: 2024 $7,739.70 $1,547.94 $1,102.91 $10,390.55 2023-24-Q4 Apr-Jun: 2024 $5,102.09 $1,020.42 $612.25 $6,734.76 2024-25-Q1 Jul-Sep: 2024 $6,145.98 $1,229.20 $599.23 $7,974.41 2024-25-Q2 Oct-Dec: 2024 $6,180.35 $1,236.07 $463.53 $7,879.95 Total Audit Results $60,985.42 $12,892.93 $11,024.76 $84,903.11 4 The City’s interest rate is set at .75% simple interest per month. November 30, 2025 , has been used as the pay date to calculate interest.
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d/b/a: The Medicine Woman Page 7

References:

Bellflower City Code, § 3.37.020 Definitions.

“Gross receipts,” except as otherwise specifically provided, means the total amount actually received or receivable from all sales; the total amount or compensation actually received or receivable for the performance of any act or service, of whatever nature it may be, for which a charge is made or credit allowed, whether or not such act or service is done as a part of or in connection with the sale of materials, goods, wares or merchandise; discounts, rents, royalties, fees, commissions, dividends, and gains realized from trading in stocks or bonds, however designated. Included in “gross receipts” is all receipts, cash, credits and property of any kind or nature, without any deduction there from on account of the cost of the property sold, the cost of materials used, labor or service costs, interest paid or payable, or losses or oth er expenses whatsoever, except that the following is excluded:

1. Cash discounts where allowed and taken on sales;

2. Credit allowed on property accepted as part of the purchase price and which property may later be sold, at which time the sales price is included as gross receipts;

3. Any tax required by law to be included in or added to the purchase price and collected from the consumer or purchaser;

5. Receipts from investments where the holder of the investment receives only interest and/or dividends, royalties, annuities and gains from the sale or exchange of stock or securities solely for a person’s own account, not derived in the ordinary course of a business;

6. Receipts derived from the occasional sale of used, obsolete or surplus trade fixtures, machinery or other equipment used by the taxpayer in the regular course of the taxpayer’s business;

8. Receipts of refundable deposits, except that such deposits when forfeited and taken into income of the business must not be excluded when in excess of one dollar ($1.00);

Bellflower City Code, § 3.37.060

D. Tax on All Other Commercial Cannabis Businesses.

1. Every person who is engaged in business as a dispensary, manufacturer, testing laboratory, or distribution facility, or engaging in delivery of cannabis in the City must pay an annual commercial cannabis tax. The initial tax rate effective July 1, 2017 is set at five percent (5%) of the gross receipts per fiscal year.

2. Beginning on July 1, 2020, the tax rate will automatically increase each fiscal year by two and one-half percent (2.5%). Except as otherwise provided, the maximum tax rate is ten percent (10%) per fiscal year on gross receipts. (Ord. 1332 § 1, 12/12/16; Ord. 1324 § 1, 3/7/17)

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Bellflower City Code, § 3.37.110

Unless voter approval is required by the California Constitution or applicable law, the City Council may exercise all applicable powers set forth in the Government Code including, without limitation, amending this chapter by ordinance upon three (3) affirmative votes by its members. It may, in additional, adopt by ordinance or resolution such additional regulations that may be necessary to implement the purposes of this chapter. (Ord. 1332 § 1, 12/12/16; Ord. 1324 § 1, 3/7/17)

Bellflower City Code, § 3.37.140

A. Taxes collected from a person, or owed by a person which are not received by the administrator on or before the due dates provided in this chapter are delinquent and are subject to penalties and interest. Should the due date occur on a weekend or legal holiday, the return must be received by the administrator on the first regular working day following a Saturday/Sunday or legal holiday. A direct deposit, including electronic fund transfers and other similar methods of electronically exchanging monies between financial accounts, made by a person in satisfaction of its obligations under this subsection is considered timely if the transfer is initiated on or before the due date, and the transfer settles into th e City's account on or before the following business day.

B. If the person required to remit the tax fails to remit the tax, the administrator will attach a penalty for such delinquencies or deficiencies at the rate of five percent (5%) of the total tax that is delinquent or deficient in the remittance, and if not remitted within two (2) working days after the date of the delinquency, will pay a total penalty of twenty percent (20%) of the amount of tax owed.

C. In addition to all other authorizations under this section, the administrator may impose a maximum civil penalty of five thousand dollars ($5.000.00) per day upon an unlicensed cannabis facility that fails to remit any tax required by this chapter.

D. The administrator has the power to impose additional penalties upon persons required to remit taxes under the provisions of this chapter for fraud or gross negligence in reporting or remitting at the rate of fifty percent (50%) of the amount of the tax required to be remitted, or as recomputed by the administrator.

E. In addition to any other penalties imposed by this chapter, any person required to remit any tax imposed by the provisions of this chapter who fails to remit the tax must pay interest at the rate of three-quarters of one percent (0.75%) per month, or any fraction thereof, on the amount of the tax, exclusive of penalties, from the date on which the remittance first became delinquent, until paid.

F. No penalty or interest will be applied if delinquencies are the result of natural disasters or other phenomena beyond the control of the person charged with remitting the tax, provided the person being delinquent notifies the administrator as soon as normal communications permit. (Ord. 1332 § 1, 12/12/16; Ord. 1338 § 3, 5/22/17)

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4905-1979-6876 v1
Los Angeles – Inland Empire – Marin County – Oakland – Orange County – Palm Desert – San Diego – San Francisco – Silicon Valley – Ventura County 444 South Flower Street , 40th Floor
Los Angeles, CA 90071 -2942
voice 213.236.0600 - fax 213.236.2700
www.bwslaw.com
January 30, 2026
Jennifer McGrath, Esq.

Law Officers Jennifer McGrath
9114 Adams Ave #264, Huntington
Beach, CA 92646
[email protected]
The Medicine Woman Group, LLC.
(d.b.a. The Medicine Woman)
9058 Rose Street
Bellflower, CA 90706

Re: DEMAND FOR PAYMENT AND NOTICE OF SUSPENSION
The Medicine Woman Group, LLC.

Dear Ms. McGrath:

Thank you for speaking with me this week. This correspondence is in regards to your client, The Medicine Woman Group, LLC, concerning past due taxes and permit renewal fees for the cannabis dispensary located at 9058 Rose Street in the City of Bellflower (the “City”).

After thorough review of this matter, the City Attorney’s Office has concluded that Bellflower Municipal Code (“BMC”) § 3.37.180(B) is applicable here concerning your client’s appeal rights to dispute the December 11, 2025 Audit Report. It states in relevant part:

BMC 3.37.180 – Appeals.

A. The provisions of this section apply to any assessment, decision or administrative ruling of the (tax) administrator, other than a decision relating to a refund. Any person aggrieved by any assessment, decision or administrative ruling of the administrator, other than a decision relating to a refund, is required to comply with the appeals procedure of this section. Compliance with this section is a prerequisite to a lawsuit. Nothing permits the filing of a claim or action on behalf of a class or group of taxpayers.

B. If any person is aggrieved by any assessment, decision or administrative ruling of the administrator, other than a decision relating to a refund; or with the failure of the administrator to grant an exemption as provided - 33 -

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The Medicine Woman Group, LLC. (d.b.a. The Medicine Woman) January 30, 2026

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for under this chapter; he or she may appeal to the City Council by filing a notice of appeal with the City Clerk within 14 days of the date of the assessment, decision or administrative ruling of the administrator which aggrieved the person or person. (Underline added.)
On December 11, 2025, Finance Director and tax administrator, Anna Garan, provided your client with her assessment of unpaid taxes to the City with an audit report and past due owed. Any notice of appeal concerning that assessment needed to be filed with the City Clerk no later than December 26, 2025. We have no record of compliance with BMC § 3.37.180. Consequently, any appeal rights regarding that assessment have been waived.

Even if your client were in a position to file such an appeal, our review indicates that the conclusions of your client’s tax liabilities made in the audit report dated December 11, 2025 are substantiated. For example, BMC § 3.37.020 defines “gross receipts” upon which tax to the City is calculated as including:
…the total amount actually received or receivable from all sales; the total amount or compensation actually received or receivable for the performance of any act or service, of whatever nature it may be, for which a charge is made or credit allowed, whether or not such act or service is done as a part of or in connection with the sale of materials, goods, wares or merchandise… (Underline added.)
Furthermore, the calculation of gross receipts includes all taxes recovered from consumers that are not otherwise “required by law to be included in or added to the purchase price and collected from the consumer or purchaser.” (BMC § 3.37.020(3).) No unpaid taxes asserted from the Audit Report were based on excluded taxes.

Lastly with regard to the Audit Report, delivery was assumed based on a random sample of receipts that revealed deliveries were made from the dispensary during the audit period. The auditor even reached out to The Medicine Woman’s accountant , Ian DeLaura, in early November of 2025 regarding this issue before the Audit Report was issued. Mr. DeLaura stated he would respond to the request for more records in a matter of days but never did. As a result, the auditor extrapolated delivery fees based on the random sample for purposes of the Audit report.

But again, this is all now moot as time to file an appeal of the tax administrator’s assessment that encompasses all these issues expired last December. - 34 -
BURKE, WILLI/\MS & SORENSEN, LLP

The Medicine Woman Group, LLC. (d.b.a. The Medicine Woman) January 30, 2026

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You also indicated it was improper for Ms. Garan to apply your client’s payment of $38,847.00 to past due taxes, rather than your client’s Annual Cannabis Business Permit Fee. By way of context, on December 17, 2025, the City Manager explicitly advised your client in writing that although the City Council approved renewal of your client’s Cannabis Business Permit (“CBP”) for 2026, the permit fee of $38,847.00 must be paid for that CBP to be active. That letter further advised that The Medicine Woman’s then current permit would “expire on December 31, 2025,” and that “OPERATING A CANNABIS RELATED BUSINESS WITHOUT A VALID PERMIT IS UNLAWFUL AND MAY RESULT IN SEVERE CRIMINAL AND CIVIL PENALTIES.” On January 9, 2026, your client sought to present payment of $38,847.00 for the 2026 CBP. Ms. Garan explicitly advised your client verbally, as she had previously done in writing, that any funds provided to the City would be applied first to the outstanding balance due. After acknowledging this advisal, your client agreed to remit that $38,847.00 in (partial) satisfaction of the unpaid taxes.

Please Be Advised that because of the unpaid balance due, The Medicine Woman location in Bellflower is currently deemed suspended per BMC §

14.28.040(2), and any operation of the dispensary is unlawful and subject to enforcement under the BMC and State law. Such enforcement may include, without limitation, daily administrative fines of $5,000 for each day of operation (BMC §

8.48.100), seizure and destruction of all cannabis products on-site pursuant to public nuisance abatement warrant, and misdemeanor criminal prosecution.

Please Be Further Advised that, as a courtesy, the City has not taken any enforcement action for operating an unlawful cannabis dispensary. The Medicine Woman is being provided until 3:00 p.m. on February 9, 2026, to remit the total due amount of $102,210.19. If payment in full is not received by this date and time, the City may, at its sole discretion, initiate enforcement action.

Please Be Further Advised that The Medicine Woman is also required to pay any tax liability for the July-September 2025 tax period by February 9, 2026, and the October-December 2025 tax period is due by February 2, 2026. This is separate from, and in addition to, the existing balance of $102,210.19.

When considering your response to this Notice, you may also want to advise your client that the terms of their operating a cannabis business in Bellflower specifically includes a defense and indemnity provision concerning any legal challenge involving The Medicine Woman business. This includes any action brought by your client against the City.
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BURKE, WILLI/\MS & SORENSEN, LLP

The Medicine Woman Group, LLC. (d.b.a. The Medicine Woman) January 30, 2026

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I appreciate this is likely not the response you were hoping for and you may have questions regarding the contents of this letter. Please feel free to reach out to me at 619-814-5810 or at [email protected].

Sincerely,

BURKE, WILLIAMS & SORENSEN, LLP
Karl H. Berger, City Attorney
City of Bellflower

________________________________
by: Timothy E. Campen
Assistant City Attorney

cc: Anna Garan, Director of Finance
Ryan Smoot, City Manager
Karl H. Berger, City Attorney
Solange Fortenbach, Deputy City Attorney
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BURKE, WILLI/\MS & SORENSEN, LLP

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City of Bellflower

LAW OFFICES OF

JENNIFER MCGRATH
9114 Adams Avenue #264 , Huntington Beach, CA 92646
714 .231.2124 I [email protected]
Attn: Ryan Smoot, City Manager
16600 Civic Center Drive
Bellflower CA 90706
Via email only
[email protected]
RE: Request for Hearing on Notice of Suspension of Cannabis Business Permit of The Medicine Woman Group, LLC, dated January 30, 2026
Dear Mr. Smoot:

On January 30, 2026, The Medicine Woman Group, LLC was notified that their Cannabis Business Permit has been suspended effective 3 p.m. on February 9, 2026, due to an unpaid balance of $102,210.19 ($93,210.90 cannabis taxes+ $9000.00 auditor fees), by Assistant City Attorney Tim Campen. The Medicine Woman is exercising its right to a request a hearing before the City Manager under Bellflower Municipal Code ("BMC") 14.28.040(0). Said hearing to be scheduled within 30 days.

BMC 14.28.040(E). Although there is no BMC code requirement to state the grounds for the hearing, The Medicine Woman felt it would better serve both the City and The Medicine Woman to detail the reasons for this request.

Grounds for Hearing:
1 . Defective Suspension and Notice. Pursuant to BMC 14.28.040(6), the City Manager is the official with the power to suspend a Cannabis Business Pennit but, in this case, it appears the City Attorney's office improperly made that decision , and the notice of suspension must "provide information regarding the right to a hearing before the City Manager," which it did not.

2. Inadequate grounds for suspension. Pursuant to BMC 14.28.040(A)(2), the City Manager's authority to suspend or revoke is limited to "[i]f the permittee violates any condition imposed by this title or by the tenns of the permit." The payment of taxes are not a condition imposed by the BMC or by the terms of the permit; moreover, the City failed to provide The Medicine Woman with proper notice of any tax assessment and the requisite hearing to object to the tax assessment pursuant to BMC 3.37.150. That section requires that formal notice of any tax assessment be mailed by the administrator to The Medicine Woman with details of the assessment and the time and place where the assessment may be contested at least 10 days before a hearing on the assessment. That was not done. The December 11, 2025, email from Anna Garan, Director of Finance, was not mailed, does not contain the requisite information, and there was no hearing providing an opportunity for interested

- 38 -
parties to object. Once that hearing takes place, then the assessment, decision, or administrative ruling may be appealed to the City Council under BMC 3.37.180.

3. Intentional Interference. The City appears to be intentionally interfering with The Medicine Woman's legal rights. The City first claimed that The Medicine Woman was notified of a final decision on the tax assessment in November and that its appeal rights ran out later that month . Then the City changed its story and claimed The Medicine Woman was notified of a final decision on the tax assessment in December and that its appeal rights ran out later that month. Neither is true and The Med icine Woman still has not been given proper notice of any final decision on the tax assessment, nor a hearing on the tax assessment. This entire time the City has been aware that The Medicine Woman disagrees with and objects to the tax assessment. The City's suspension of The Medicine Woman's Cannabis Business Permit appears to be an improper tactic to interfere with The Medicine Woman's legal rights and coerce it into acquiescing in the City's unlawful conduct. The City has even gone so far as to instruct its employees not to talk to The Medicine Woman. And, when attorneys for The Medicine Woman requested the City Attorney's office provide the permit suspension appeal form approved by the City Manager to request a hearing with the City Manager as required by BMC

14.28.040(D), the City Attorney's office failed and refused to do so.

4. Abuse of Discretion. All of the above demonstrates that the City has failed to follow its own rules and that city officials have failed to perform their duty. To the extent the City exercised discretion in its decisions, the City abused that discretion and its actions and determinations on such matters were/are arbitrary, capricious, and unfair. In so doing , the City has violated The Medicine Woman 's due process and equal protection rights under the applicable law including the Bellflower Municipal Code , state law , and the state and federal Constitutions.

A written brief and testimony will be presented at the hearing as well. We look forward to the hearing.

Sincerely,
~/f/~r~-»tCfMT/1
Jennifer McGrath , Esq.

I, Charis Surrett, Chief Executive Officer, The Medicine Woman Group, LLC, authorize this request for heMng submitted on~f ~~
~~ d/44::

Cc:

Berger, Karl H.([email protected])
Tim Campen {[email protected])
Charis Surrett Date
Solange Fortenbach ([email protected])
Mayra Ochiqui ([email protected])
Anna Garan ([email protected])
Wangsu Lee ([email protected])

4911-6064-3469 v1
Los Angeles – Inland Empire – Marin County – Oakland – Orange County – Palm Desert – San Diego – San Francisco – Silicon Valley – Ventura County 444 South Flower Street , 40th Floor
Los Angeles, CA 90071 -2942
voice 213.236.0600 - fax 213.236.2700
www.bwslaw.com
February 5, 2026
VIA U.S.P.S. MAIL AND ELECTRONIC MAIL

Jennifer McGrath, Esq.

Law Officers Jennifer McGrath
9114 Adams Ave., #264
Huntington Beach, CA 92646

[email protected]
Luke Burrett
The Medicine Woman Group, LLC.
(d.b.a. The Medicine Woman)
9058 Rose Street
Bellflower, CA 90706

[email protected]

Re: NOTICE OF TAX ASSESSMENT HEARING

NOTICE OF RECEIPT OF CBP SUSPENSION APPEAL

NOTICE OF VIOLATION
The Medicine Woman Group, LLC.

Dear Ms. McGrath and Mr. Burrett:

As a show of good faith and on behalf of the Bellflower Director of Finance and tax administrator, Anna Garan, a hearing before the tax administrator to contest her assessment of The Medicine Woman’s unpaid cannabis business taxes to the City of Bellflower (BMC § 3.37.080), a hearing has been set as follows:

NOTICE OF TAX ASSESSMENT HEARING
per BMC § 3.37.150

February 17, 2026 at 1:00 p.m.

Bellflower City Hall
16600 Civic Center Dr.

Bellflower CA 90706

Attached hereto as Exhibit A is a tax audit regarding The Medicine Woman, previously provided to your client on or about December 11, 2025, which constitutes the tax assessor’s assessment regarding unpaid taxes pursuant to BMC § 3.37.120, et seq. - 39 -

B URKE, WILLIAMS & SORENSEN, L LP

Jennifer McGrath, Esq.

Luke Burrett
The Medicine Woman Group, LLC. (d.b.a. The Medicine Woman) February 5, 2026

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NOTICE OF RECEIPT OF

CBP SUSPENSION APPEAL

Furthermore, this is Notice that the City of Bellflower (City) is in receipt of your request to appeal the City Manager’s suspension of The Medicine Woman’s cannabis business permit (CBP) dated January 30, 2026, pursuant to BMC Chapter 14.28. A hearing for this matter will be set before the Bellflower City Council within 45 days. In lieu of a form provided by the City Clerk to submit, please mail to the City Clerk written responses to the following pursuant to BMC § 14.28.050(B):

1. The name, address and telephone number of the person making the appeal;

2. A description of the decision, determination or order which is the subject of the appeal and the date such decision, determination or order was made or issued; and

3. A complete description of all grounds for appeal, together with any evidence in support of the appeal.

NOTICE OF VIOLATION

Please Be Advised that the Medicine Woman Dispensary in Bellflower is currently operating unlawfully without a valid Cannabis Business Permit in violation of BMC §§ 14.08.010, et seq. On December 16, 2026, The Medicine Woman was mailed the following advisal from the City of Bellflower:

NOTE THAT THE CURRENT PERMIT EXPIRES ON DECEMBER 31,
2025. OPERATING A CANNABIS RELATED BUSINESS WITHOUT

A VALID PERMIT IS UNLAWFUL AND MAY RESULT IN SEVERE
CRIMINAL AND CIVIL PENALTIES.

As detailed in my letter to you dated January 30, 2026, and which is fully incorporated by reference, payment for The Medicine Woman’s 2026 CBP has not been received. Any funds remitted to the City must first satisfy unpaid cannabis business - 40 -
BURKE, WILLI/\MS & SORENSEN, LLP

Jennifer McGrath, Esq.

Luke Burrett
The Medicine Woman Group, LLC. (d.b.a. The Medicine Woman) February 5, 2026

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taxes before being applied to the 2026 CBP. A refund of any paid taxes will be provided, if required, following final administrative or judicial determination of The Medicine Woman’s appeal of the tax administrator’s assessment, as referenced above.

Please Be Further Advised that enforcement relating to operating an unpermitted cannabis dispensary is under the authority of the City Attorney, pursuant to BMC Chapter 14.28, and is separate and independent from the City Manager’s suspension of The Medicine Woman’s permit.

Please Be Further Advised that because the 2026 CBP fees have not been paid, The Medicine Woman location in Bellflower is currently operating unlawfully without a CBP. Any operation of an unpermitted dispensary in the City is subject to enforcement under the BMC and State law. Such enforcement may include, without limitation, daily administrative fines of $5,000 for each day of operation (BMC §

8.48.100), seizure, and destruction of all cannabis products on-site pursuant to public nuisance abatement warrant, civil injunctive relief, and misdemeanor criminal prosecution. (BMC §§ 14.28.010-020.)
Please Be Further Advised that, as a courtesy, the City Attorney has not taken any enforcement action for operating an unlawful cannabis dispensary. As previously advised on January 30, 2026, The Medicine Woman is being provided until 3:00 p.m. on February 9, 2026, to remit the total due amount of $102,210.19. If payment in full is not received by this date and time, the City Attorney may, at his sole discretion, initiate enforcement action. Any pending hearings before the tax administrator or the City Council will NOT stay enforcement by the City Attorney.

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BURKE, WILLI/\MS & SORENSEN, LLP

Jennifer McGrath, Esq.

Luke Burrett
The Medicine Woman Group, LLC. (d.b.a. The Medicine Woman) February 5, 2026

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You may reach me at 619-814-5810 or [email protected] with any questions regarding these Notices.

Sincerely,

BURKE, WILLIAMS & SORENSEN, LLP
Karl H. Berger, City Attorney, City of Bellflower

Timothy E. Campen
Assistant City Attorney

TEC:meh
Enclosure: as stated
cc: Anna Garan, Director of Finance
Ryan Smoot, City Manager

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BURKE, WILLI/\MS & SORENSEN, LLP

Jennifer McGrath, Esq.

Luke Burrett
The Medicine Woman Group, LLC. (d.b.a. The Medicine Woman) February 5, 2026

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Exhibit A
Bellflower Tax Administrator’s Assessment
re: past due cannabis business taxes owed
by The Medicine Woman
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BURKE, WILLIAMS&SORENSEN, LLP

City of Bellflower, California
Cannabis Tax
Report of Examination

November 24, 2025

The Medicine Woman Group, LLC
d/b/a The Medicine Woman

Examination Period:

January 1, 2022, through December 31, 2024

Finance Department
City Hall
16600 Civic Center Drive
Bellflower, California 90706

Examination Performed by:

Audit Division/Compliance Section
Avenu Insights & Analytics, LLC
600 Beacon Parkway West, Ste. 900
Birmingham, AL 35209

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Avenu Insights & Analytics, LLC
Audit Division
d/b/a: The Medicine Woman Page 2

Business Name: The Medicine Woman Group

Location: 9058 Rose Street, Bellflower, CA 90706

Date of Audit: June 19, 2025

Examiner: Chris Wills

Audit Commentary:

Mr. Woo and Mr. Scadron presented the records for review. Records were received electronically after the walk-through of the dispensary and were reviewed at Avenu's office.

Current Methods:

Purchasing Process & Inventory Handling Procedures:

Upon arrival, the delivery driver signs in with the front desk prior to being allowed into the facility. Either Mr.

Avenu Insights & Analytics, LLC
Audit Division
d/b/a: The Medicine Woman Page 3

cabinets/display cases and backstock items are locked in large safes in limited access areas. Only a select few personnel have access to the backstock safe and limited access areas.

Customer Check-in/verification Procedures:

Sales and Cash Handling Procedures:

TMW has two types of customers, pick-up/delivery and in-store purchases. Pick-up/delivery customers order their products online. If the customer selects pick-up, they will come to the store to pick up their order once they are notified it is ready. Customers that select delivery will have their purchase delivered to them by a TMW employee. In-store customers have their transactions completed in the POS system, Treez, by scanning the barcode on the product(s) that are being purchased by the customer. Treez is configured to round the total selling price down, i.e. in favor of the customer, based on the final amount so that TMW does not have to deal with coins. TMW provides an ATM to their in-store customers so that they can withdraw cash to complete their purchase. TMW fills the ATM machine from cash on hand. Customers are charged a fee to withdraw cash from the ATM.

Reporting:

TMW records all sales transactions in Treez. Each customer receipt includes the price of the item(s) purchased as well as separately stated state and local taxes. Taxes listed out include sales tax at 10.25%, the City’s

1 Once the deposits go into the smart safe, liability of the money is shifted to the bank. The bank will send an armored truck around once a week, or as needed, to empty the safe.
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Avenu Insights & Analytics, LLC
Audit Division
d/b/a: The Medicine Woman Page 4

Audit Procedures and Testing Methodology:

Documents reviewed included: Bellflower cannabis tax returns, Treez / POS monthly sales detail and summary reports, month/quarter end working papers, bank statement, inventory purchase logs, and sample customer receipts. Gross receipts from the POS sales reports were recalculated and compared to the working paper amounts to confirm the calculated taxable gross receipts. The bank statements were also reviewed to verify the amount of cash deposited did not exceed the amount reported to the City. Sample customer receipts were requested to confirm how TMW presented taxes to their customers and to reconcile the amounts listed in the sales reports. Inventory purchase logs were compared to the POS sales details to reconcile purchases with s ales to confirm inventory levels were representative of the sales completed. Once the taxable gross receipt amounts were confirmed, they were reconciled to the cannabis tax returns to verify they were accurately reported to the City.

Brand Product Available
per Treez
Counted by
Auditor
St. Ides Purple Grape Tincture 9 9
Lost Farms Watermelon 18 18
Alpin Cannatonic 8 8
Pistil Whip Frozen Banana 8 8
Coastal Sun Tropicana Cherry 5 5

Applicable Sections of Law and Municipal Code:

Bellflower City Code § 3.37 et seq.

California Health and Safety Code § 11018, § 11362.5, and § 11362.7 et seq.

California Revenue and Taxation Code § 34010 - 34021.5
California Business and Professional Code § 26000 - 26231.2

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Avenu Insights & Analytics, LLC
Audit Division
d/b/a: The Medicine Woman Page 5

Audit Findings and/or Errors Discovered:

The second issue discovered was that TMW charged their customers a delivery fee on transactions that are delivered to their customers and did not report those amount as gross receipts to the City. Pursuant to the City’s definition of gross receipts, amounts received for “the performance of any act or service” in which a charge is made is deemed to be included. Delivery fees are charged for the delivery service provided by TMW and therefore, should be included within the total gross receipts reported to the City. The delivery fees were not listed on the POS transactions provided; however, the fees were identified when reviewing a few sample receipts. The actual amount received for delivery fees for the audit period was requested from TMW, but those amounts were not presented at the time of the audit report. In lieu of having the actuals, a monthly average from the prior audit’s delivery fee revenues were calculated and applied to each month of the current audit period.

The tables below breakdown the amounts reported to the City as well as the audited gross receipts.

Table 1 below details the audited gross receipts that should have been reported to the City for each reporting period.

Table 1- Audited Gross Receipts
Filing Period Calendar
Period
Net Sales Cannabis Tax
(City)
Delivery
Fees2
Audited Gross
Receipts
(a) (b) (c) (d)= (a) + (b) + (c)
2021-22-Q3 Jan-Mar: 2022 $1,017,738.11 $83,142.97 $7,151.50 $1,108,032.58 2021-22-Q4 Apr-Jun: 2022 $1,001,235.04 $81,604.30 $7,151.50 $1,089,990.84 2022-23-Q1 Jul-Sep: 2022 $935,267.94 $76,004.79 $7,151.50 $1,018,424.23 2022-23-Q2 Oct-Dec: 2022 $892,896.90 $72,472.56 $7,151.50 $972,520.97 2022-23-Q3 Jan-Mar: 2023 $842,697.17 $69,082.66 $7,151.50 $918,931.33 2022-23-Q4 Apr-Jun: 2023 $826,699.80 $68,025.23 $7,151.50 $901,876.53 2023-24-Q1 Jul-Sep: 2023 $787,645.39 $64,746.28 $7,151.50 $859,543.16 2023-24-Q2 Oct-Dec: 2023 $776,238.00 $63,982.77 $7,151.50 $847,372.27 2023-24-Q3 Jan-Mar: 2024 $751,090.06 $61,971.27 $7,151.50 $820,212.83 2023-24-Q4 Apr-Jun: 2024 $734,124.24 $60,432.81 $7,151.50 $801,708.55 2024-25-Q1 Jul-Sep: 2024 $690,890.11 $57,036.96 $7,151.50 $755,078.57 2024-25-Q2 Oct-Dec: 2024 $659,022.92 $54,183.88 $7,151.50 $720,358.30 Total Audited Gross Receipts $9,915,545.68 $812,686.47 $85,818.00 $10,814,050.15

2 Average from the prior audit was used as the actuals were not presented during the audit. TMW began charging delivery fees in January 2021. The annual delivery fee revenue in 2021 was $28,606. This amount was divide d by four (4) to come up with the quarterly amount of $7,151.50. This average was applied to all quarters within the audit period. - 48 -

Avenu Insights & Analytics, LLC
Audit Division
d/b/a: The Medicine Woman Page 6

Table 2 compares the amounts originally reported to the City by TMW to the audited gross receipts.

Table 2- Audit Results: City Cannabis Tax
Filing
Period
Calendar
Period
Gross Receipts
reported to City
Audited Gross
Receipts
Difference (Over)
/ Under Reported
Cannabis Tax
(Over) / Under Paid
(a) (b) (c) = (b) – (a) (d) = (c) x 8.5%
2021-22-Q3 Jan-Mar: 2022 $1,112,641.97 $1,108,032.58 ($4,609.39) ($391.80) 2021-22-Q4 Apr-Jun: 2022 $1,098,685.73 $1,089,990.84 ($8,694.89) ($739.07) 2022-23-Q1 Jul-Sep: 2022 $1,031,208.79 $1,018,424.23 ($12,784.56) ($1,086.69) 2022-23-Q2 Oct-Dec: 2022 $858,229.02 $972,520.97 $114,291.95 $9,714.82 2022-23-Q3 Jan-Mar: 2023 $842,697.17 $918,931.33 $76,234.16 $6,479.90 2022-23-Q4 Apr-Jun: 2023 $799,470.06 $901,876.53 $102,406.47 $8,704.55 2023-24-Q1 Jul-Sep: 2023 $758,971.63 $859,543.16 $100,571.53 $8,548.58 2023-24-Q2 Oct-Dec: 2023 $742,259.00 $847,372.27 $105,113.27 $8,934.63 2023-24-Q3 Jan-Mar: 2024 $721,349.48 $820,212.83 $98,863.35 $8,403.38 2023-24-Q4 Apr-Jun: 2024 $735,124.24 $801,708.55 $66,584.31 $5,659.67 2024-25-Q1 Jul-Sep: 2024 $676,048.57 $755,078.57 $79,030.00 $6,717.55 2024-25-Q2 Oct-Dec: 2024 $640,779.11 $720,358.30 $79,579.19 $6,764.23 City Cannabis Tax Results $10,017,464.77 $10,814,050.15 $796,585.38 $67,709.76

Penalty and Interest:

Table 3: Audit Results (Including Penalty and Interest) Filing
Period
Calendar
Period
Cannabis
Tax Due Penalty- 20% Interest3 Total Due
(a) (b) = (a) * 20% (c) (d) = (a) + (b) + (c)
2021-22-Q3 Jan-Mar: 2022 ($391.80) $0.00 $0.00 ($391.80) 2021-22-Q4 Apr-Jun: 2022 ($739.07) $0.00 $0.00 ($739.07) 2022-23-Q1 Jul-Sep: 2022 ($1,086.69) $0.00 $0.00 ($1,086.69) 2022-23-Q2 Oct-Dec: 2022 $9,714.82 $1,942.96 $2,404.42 $14,062.20 2022-23-Q3 Jan-Mar: 2023 $6,479.90 $1,295.98 $1,506.58 $9,282.46 2022-23-Q4 Apr-Jun: 2023 $8,704.55 $1,740.91 $1,762.67 $12,208.13 2023-24-Q1 Jul-Sep: 2023 $8,548.58 $1,709.72 $1,538.74 $11,797.04 2023-24-Q2 Oct-Dec: 2023 $8,934.63 $1,786.93 $1,407.20 $12,128.75 2023-24-Q3 Jan-Mar: 2024 $8,403.38 $1,680.68 $1,197.48 $11,281.54 2023-24-Q4 Apr-Jun: 2024 $5,659.67 $1,131.93 $636.71 $7,428.31 2024-25-Q1 Jul-Sep: 2024 $6,717.55 $1,343.51 $604.58 $8,665.64 2024-25-Q2 Oct-Dec: 2024 $6,764.23 $1,352.85 $456.59 $8,573.67 Total Audit Results $67,709.76 $13,985.46 $11,514.97 $93,210.19

3 The City’s interest rate is set at .75% simple interest per month. November 30, 2025 has been used as the pay date to calcula te interest.
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Avenu Insights & Analytics, LLC
Audit Division
d/b/a: The Medicine Woman Page 7

References:

Bellflower City Code, § 3.37.020 Definitions.

“Gross receipts,” except as otherwise specifically provided, means the total amount actually received or receivable from all sales; the total amount or compensation actually received or receivable for the performance of any act or service, of whatever nature it may be, for which a charge is made or credit allowed, whether or not such act or service is done as a part of or in connection with the sale of materials, goods, wares or merchandise; discounts, rents, royalties, fees, commissions, dividends, and gains realized from trading in stocks or bonds, however designated. Included in “gross receipts” is all receipts, cash, credits and property of any kind or nature, without any deduction there from on account of the cost of the property sold, the cost of materials used, labor or service costs, interest paid or payable, or losses or other expenses whatsoever, except that the following is excluded:

1. Cash discounts where allowed and taken on sales;

2. Credit allowed on property accepted as part of the purchase price and which property may later be sold, at which time the sales price is included as gross receipts;

3. Any tax required by law to be included in or added to the purchase price and collected from the consumer or purchaser;

5. Receipts from investments where the holder of the investment receives only interest and/or dividends, royalties, annuities and gains from the sale or exchange of stock or securities solely for a person’s own account, not derived in the ordinary course of a business;

6. Receipts derived from the occasional sale of used, obsolete or surplus trade fixtures, machinery or other equipment used by the taxpayer in the regular course of the taxpayer’s business;

8. Receipts of refundable deposits, except that such deposits when forfeited and taken into income of the business must not be excluded when in excess of one dollar ($1.00);

Bellflower City Code, § 3.37.060

D. Tax on All Other Commercial Cannabis Businesses.

Bellflower City Code, § 3.37.110
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Avenu Insights & Analytics, LLC
Audit Division
d/b/a: The Medicine Woman Page 8

Bellflower City Code, § 3.37.140

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From:Jennifer McGrath
To:Campen, Timothy E.; Anna Garan
Cc:Ryan Smoot; [email protected]; Berger, Karl H.; Fortenbach, Solange; Ed Pinchiff Subject:The Medicine Woman Group LLC - 3.37.150 Hearing Date:Friday, February 13, 2026 12:00:32 PM
Mr. Campen and Ms. Garan -
The Medicine Woman Group is respectfully requesting a one week extension of the hearing currently scheduled for February 17, 2026, to February 24, 2026. This request is based on the positive discussions of February 9 resolving the outstanding suspension issues and the new arguments presented at that meeting. The Medicine Woman would like an opportunity to present a brief outlining the issues with supporting documentation objecting to the audit results with adequate time in advance for the City and its counsel to review in advance of the hearing.

As Monday is a holiday, please respond by the end of the business day today.

Jennifer McGrath
Law Offices of Jennifer McGrath
7755 Center Avenue, Suite 1100
Huntington Beach CA 92647
(714) 231-2124
https://www.jennifermcgrath.com/

This email has been scanned for spam and viruses by Proofpoint Essentials. Click here to report this email as spam.
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CITY OF BELLFLOWER

NOTICE OF TAX ASSESSMENT FOR UNPAID TAX, PENALTIES,
INTEREST AND PERMITTEE’S SHARE OF AUDIT COST –

THE MEDICINE WOMAN GROUP, LLC

TAKE NOTICE that the Bellflower Cannabis Tax Administrator will hold a hearing on Tuesday, February 24, 2026, at 1:00 p.m. in the City Council Chambers located at 16600 Civic Center Drive, Bellflower, CA 90706 to consider a tax assessment for unpaid tax, penalties, interest, and permittee’s share of audit cost for The Medicine Woman Group, LLC.

This hearing is open to the public. For all questions related to this matter, please contact telephone number (562) 804-1424, extension 2239. All written comments concerning this may be submitted to the City Clerk’s Office at 16600 Civic Center Drive, Bellflower, CA 90706; or by email at [email protected].

MAYRA OCHIQUI, CITY CLERK

Post: February 17, 2026
Remove: February 25, 2026

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Th e Ci t y of B e llfl owe r
7a.milies. '73us;r1esses. 7-ulures.
16600 Civic Center Drive, Bellflow e r, C A 90706
Tel 562.804.1424 Fax 562.925.8660 www.beUflow er.org

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TO:

ATTENTION:

FROM:

SUBJECT:

DATE:

Honorable Mayor and Members of the City Council
Jeffrey L. Stewart, City Manager
Tae Rhee, Director of Finance/City Treasurer
Consideration and possible action to adopt Resolution No. 22-18 - A Resolution ratifying Administrative Policy and Procedure No. 3 ("AP&P No. 3"), as amended, determining that the City of Bellflower's cannabis tax applies to the sale of industrial hemp-derived products.

May 9, 2022

EXECUTIVE SUMMARY
In accordance with Bellflower Municipal Code ("BMC")§ 3.37.120, the Director of Finance reviewed the cannabis tax regulations within BMC Chapter 3.37 to determine whether the cannabis tax applies to retail establishments selling industrial hemp-derived products.

The cannabis tax regulations are separate from the BMC regulations governing cannabis business permits issued in accordance with BMC Title 14. After reviewing the matter and consulting with the City Attorney's office, the Director of Finance promulgated administrative policy and procedure ("AP&P") No. 3, which authorizes collection of cannabis taxes from the businesses selling industrial hemp-derived products effective July 1, 2019.

On April 20, 2022, the City received a request for refund for cannabis taxes paid by My CBD Hub, LLC totaling $39,761.85. While that request was denied in accordance with the BMC -and is not the subject of this agenda item -it prompted a reexamination of AP&P No. 3. The amended AP&P No. 3, issued on April 28, 2022, clarifies that only those businesses that sell industrial hemp-derived products exceeding 50% of their overall sales are required to pay the cannabis tax. The purpose of Resolution No. 22-18 is to retroactively ratify AP&P No. 3 effective July 1, 2019 and authorize its implementation since that date and as amended on April 28, 2022.

RECOMMENDATION TO CITY COUNCIL
1) Adopt Resolution No. 22-18 which ratifies AP&P No. 3 and authorizes collection of the cannabis tax from the businesses selling industrial hemp-derived products effective July 1, 2019 and amended April 28, 2022; or
2) Alternatively, discuss and take other action related to this item.

Page 1 of 2 ends

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Staff Report -Amended AP&P No. 3, Industrial Hemp-Derived Products May 9, 2022

Page 2 of 2 ends

FISCAL IMPACT
The amended AP&P No. 3, issued on April 28, 2022, clarifies that only those businesses that sell industrial hemp-derived products exceeding 50% of their overall sales are required to pay the cannabis tax. Based on the current cannabis tax collection data, the impact of the amended AP&P No. 3 may be approximately $100 per year in reduction in cannabis tax from exempting a business that sells below this 50% threshold.

DISCUSSION
AP&P No. 3 was administratively adopted on July 1, 2019, pursuant to BMC § 3.37.120(A). That section authorizes the Finance Director to promulgate administrative regulations needed to implement BMC 3.37 which governs the cannabis tax authorized by voters in 2017. These regulations are distinctly separate from BMC Title 14 which authorizes cannabis business permits; the cannabis tax is applicable regardless of whether a business is engaging in commercial cannabis activities as defined in BMC Title 14.

Currently, when applying the cannabis tax, retail establishments selling industrial hemp- derived products are considered a "dispensary" for purposes of tax collection under BMC § 3.37.060(0)(1) and must pay the applicable gross receipts tax if the establishment's gross receipts are attributable to the sale of industrial hemp-derived products.

The change to AP&P No. 3 implemented on April 28th clarifies that to be classified a "dispensary" for purposes of tax collection only requires more than 50% of the establishment's gross receipts are attributable to the sale of industrial hemp-derived products. Accordingly, if an establishment's gross receipts attributable to the sale of industrial hemp-derived products are 50% or less, then no cannabis tax would be owed and payable by the business. In contrast, if an establishment's gross receipts attributable to the sale of industrial hemp-derived products are more than 50%, then 100% of the establishment's gross receipts (including non-cannabis items sold such as t-shirts, hats, etc.) would be subject to the cannabis tax.

Such retail establishments, however, are not necessarily required to obtain a cannabis business permit pursuant to BMC Title 14. As explained in greater detail by AP&P No. 3, the definition of "cannabis" in BMC Chapter 3.37 (the cannabis tax regulations) is broader since it does not exclude "industrial hemp" as defined by California law. BMC Title 14, however, contains a narrower definition of "cannabis" to determine whether a business is engaged in commercial cannabis activity and, therefore, is required to obtain a cannabis business permit (BMC § 14.08.010). As a result, a business may be required to pay the cannabis tax, but is not required to obtain a cannabis business permit.

ATTACHMENTS
Resolution No. 22-18 ...................................................................................................... 3 Amended AP&P No. 3 .................................................................................................... 5 -2 -

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CITY OF BELLFLOWER
RESOLUTION NO. 22-18

A RESOLUTION RATIFYING ADMINISTRATIVE POLICY AND
PROCEDURE NO. 3 ("AP&P NO. 3"), AS AMENDED,

DETERMINING THAT THE CITY OF BELLFLOWER'S CANNABIS

TAX APPLIES TO THE SALE OF INDUSTRIAL HEMP-DERIVED

PRODUCTS
THE CITY COUNCIL RES.OLVES AS FOLLOWS:

SECTION 1. The City Council finds and declares as follows:

A. Bellflower Municipal Code ("BMC ")§ 3.37.120 authorizes the City Manager , or designee, to implement BMC Chapter 3.37 by , in part , promulgating administrative policies and procedures ("AP&P") to facilitate collection of the cannabis tax authorized by voters in 2017.

B. On June 25, 2019 , the City Manager promulgated AP&P No. 3 that was subsequently amended on April 28 , 2022 and is attached as Exhibit "A," and incorporated by reference. As set forth in AP&P No . 3, the cannabis tax imposed by BMC Chapter 3.37 applies to all retail establishments selling industrial hemp-derived products within the City 's jurisdiction. As further detailed within AP&P No. 3, while such retail establishments may be required to pay the cannabis tax, they may not be required to obtain a cannabis business permit contemplated by BMC Title 14 .

SECTION 2 . Ratification . The City Council finds that it is in the public interest to ratify the City Manager's actions in promulgating AP&P No. 3 in order to properly implement the will of the voters as set forth in BMC Chapter 3.37 and assist in the collection of the cannabis tax. Accordingly , the City Council retroactively ratifies AP&P No. 3 effective July 1, 2019 and authorizes its implementation since that date and as amended April 28 , 2022 .

SECTION 3. This Resolution does not affect any penalty , forfeiture , or liability incurred before , or preclude prosecution and imposition of penalties for any violation occurring before , this Resolution 's effective date . Any such amended part will remain in full force and effect for sustaining action or prosecuting violations occurring before the effective date of this Resolution.

SECTION 4 . If any part of this Resolution or its application is deemed invalid by a court of competent jurisdiction , the City Council intends that such invalidity will not affect the effectiveness of the remaining provisions or appl:cat ions and , to this end , the provisions of this Resolution are severable .

Page 1 of 2 ends

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City of Bellflower
Resolution No. 22-18

Page 2 of 2 ends

SECTION 5. The Mayor, or presiding officer, is authorized to affix a signature to this Resolution signifying its adoption by the City Council of the City of Bellflower and the City Clerk, or her duly appointed deputy, is directed to attest thereto .

SECTION 6. Electronic Signatures. This Ordinance may be executed with electronic signatures in accordance with Government Code §16.5 . Such electronic signatures will be treated in all respects as having the same effect as an orig i nal signature.

SECTION 7. This Resolution will become effective immediately upon adoption.

PASSED, APPROVED, AND ADOPTED BY THE CITY COUNCIL OF THE CITY OF BELLFLOWER ON THIS grH DAY OF MAY 2022.

Ray~tib.tt:

ATTEST:

Amended AP&P No. 3

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ADMINISTRATIVE POLICIES AND PROCEDURES
APP NO.: 3 (Revise d 4/28/2022)

WHEN THE GROSS RECEIPTS TAX ON CANNABIS DISPENSARIES APPLIES TO

PERSONS ENGAGED IN THE BUSINESS OF SELLING CANNABIS PRODUCTS

DERIVED FROM INDUSTRIAL HEMP
I. Purpose and Applicability
Every person who is engaged in business as a dispensary in the City of Bellflower must pay an annual commercial cannabis tax based on a percentage of gross receipts per fiscal year .1 For purposes of Title 3, Chapter 3.37 (the 11 Cannabis Tax Ordinance"), 11 dispensary" is defined as "a facility where cannabis, cannabis products , or devices for the use of cannabis or cannabis products are offered, either individually or in any combination, for retail sale , including an establishment that delivers cannabis and cannabis products as part of a retail sale."2 For purposes of the Cannabis Tax Ordinance , "cannabis " is defined as:
"[A]II parts of the plant Cannabis sativa Linnaeus, Cannabis indica, or Cannabis ruderalis , whether growing or not; the seeds thereof; the resin, whether crude or purified , extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds , or resin. "Cannabis " also means the separated resin, whether crude or purified, obtained from cannabis . ucannabis" also means marijuana as defined by Health and Safety Code Section 11018 and is not limited to medical cannabis ."3
By contrast , for purposes of Title 14 (Cannabis-Related Businesses) "cannabis" is defined as set forth in Business & Professions Code section 26001 (f). That section provides :
'"Cannabis ' means all parts of the plant Cannabis sativa Linnaeus, Cannabis indic a , or Cannab is ruderalis, whether growing or not; the seeds thereof; the res in, whether crude or purified , extracted from any part of the plant; and every compound , manufacture, salt, deriv ative , mixture, or preparation of the plant, its seeds, or resin. 'Cannabis ' also means the separated resin , whether crude or purified , obtained from cannabis . 'Cannabis ' does not include the mature stalks of the plant, fiber produced from the stalks , oil or cake made from the seeds of the plant, any other compound, manufacture, salt, derivative , mixture , or preparation of the mature stalks (except the resin extracted therefrom), fiber , oil 1 or cake, or the sterilized seed of the plant which is incapable of germination . For the purpose of this division , 'cannabis ' 1 BMC§ 3.37 .060{0)(1).
2 BMC § 3.37.020 .
3 BMC§ 3.37.020 .

Page 1 of 3 ends

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ADMINISTRATIVE POLICIES AND PROCEDURES
APP NO.: 3 (R evised 4 /2 8/202 2)
does not mean 'industrial hemp' as defined by Section 11018 .5 of the Health and Safety Code."
The definition of "cannabis " in the Cannabis Tax Ordinance is broader insofar as it does not exclude "industrial hemp ." Accordingly , references to ucannabis" and "cannabis products " in the Cannabis Tax Ordinance necessarily inc lude industrial hemp and industrial hemp-derived products.

Health and Safety Code section 11018 .5 defines "industrial hemp " as "a crop that is limited to types of the plant Cannabis sativa L. having no more than three-tenths of 1 percent tetrahydrocannabinol (THC ) contained in the dried flowering tops , whether growing or not; the seeds of the plant ; the resin extracted from any part of the plant ; and every compound , manufacture , salt, derivative , mixture, or preparation of the plant , its seeds or resin produced therefrom ."
In the Agriculture Improvement Act of 2018 (the "Farm Bill1'), effective January 1, 2019 , Congress removed industrial hemp-derived products from Schedule I status under the Controlled Substances Act, provided that the hemp is produced in a manner consistent with the Farm Bill , federal regulations , state regulations , and by a licensed grower .

Division 24 of the California Food and Agriculture Code provides for the cultivat ion of industrial hemp by registered growers and established agricultural research institutions .

Industrial hemp-derived products have soared in popular ity recently , part icula rly cannib idiol (CBO) oil and products infused with CBD oil. An increasing number of retail establishments are incorporating these industrial-hemp derived goods into their product mix and some retail establishments are choosing to specialize in the sale of industrial hemp-derived products , making them the focus of their business model.

This policy addresses the question of when a retail establishment selling cannab is products derived from industrial hemp becomes a "dispensary" for purposes of the Cannabis Tax Ordinance and , therefore , subject to the applicable gross receipts tax .

This policy does not apply to any person or retail establ ishment engaged in the business of selling cannabis or cannabis products that are not derived from industrial hemp .

II. Definitions
Unless the contrary is stated or clearly appears from the context , the words and phrases used herein have the meaning set forth in BMC Chapter 3.37 .

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ADMINISTRATIVE POLICIES AND PROCEDURES
APP NO.: 3 (Revised 4/28/2022)
Ill. Admin istra tion
For purposes of the Cannabis Tax Ordinance, a retail establishment is a 11 dispensary" for purposes of BMC § 3.37 .060(0)(1 )4, and therefore subject to the applicable gross receipts tax, if more than 50% of the establishment's overall gross receip,ts 5 are attributable to the sale of cannabis products derived from industrial hemp.

Reference :

Authority:

BMC § 3.37 .060tD)(1 t
BMC§ 3.37 .1 20 /
//
APPROVED: / V/ ___________ __,,..........,, ___ _
City Manager
,,,
Origination : 7/25/2019
Revised: 4/28/2022
4 This does not mean the establishment would necessarily be classified as a "dispensary" for purposes of Title 14 and, therefore, require a Cannabis Business Permit to operate lawfully . Because "indu stria l hemp" is not within the definition of "cannabis " as used in Title 14 , a cannabis business permit is not required for the sale of cannab is products derived from indu strial hemp . 5 In this context, "o verall gross receipts" means the total gross receipts of the retail establishment.

Page 3 of 3 ends

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STATE OF CALIFORNIA )

COUNTY OF LOS ANGELES )SS

CITY OF BELLFLOWER )
I, Mayra Ochiqui, City Clerk of the City of Bellflower, California, do hereby certify under penalty of perjury that the foregoing Resolution No. 22-18 was duly passed, approved, and adopted by the City Council of the City of Bellflower at the Regular Meeting of the City Council on May 9, 2022, by the following vote to wit:

AYES: Council Members -Sanchez, Santa Ines, Hamada, Koops and Mayor Dunton
Dated: May 10 2022
• '
(SEAL)

Bellflower City CouncilMay 11, 2026

Bellflower City Council
May 11, 2026