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If Steamboat Springs City Council approves a new medical marijuana ordinance tonight, it effectively will formalize collection of the city's 4.5 percent tax on marijuana sales.

Staff Attorney Dan Foote confirmed Monday it is the city's intent to collect tax on sales at medical marijuana dispensaries operating in the city.

"On a legal level, we've reached the consensus that it's taxable," Foote said.

The city code specifies that prescription drugs prescribed by a physician or pharmacist are not subject to city sales tax. However, city officials are interpreting the state constitution as classifying a doctor's validation of an individual's need for medical marijuana as something other than a prescription.

Doctors provide medical marijuana patients with written certification for the use of medical marijuana, and patients are required to obtain an ID card from the state.

"You get a card that allows you to buy it, but it's not something that is prescribed," Interim City Finance Director Bob Litzau said. "Since marijuana is not a prescription (drug) it's taxable."

Mark Couch, a spokesman for the Colorado Department of Revenue, said his agency concurs with the city's interpretation.

"In our view, yes, medical marijuana is subject to sales tax," Couch said. "We're waiting for confirmation from the state's attorney general."

Litzau said the city would not break out the amount of taxes collected by medical marijuana dispensaries here in its monthly sales tax reports. That is in keeping with the city's policy of not revealing statistics that could be used to derive the revenues of individual businesses.

City Council will consider the second reading of the ordinance near the end of tonight's meeting, which is not expected to run beyond 7:30 p.m. The language of the ordinance includes some changes from the original draft that was approved Oct. 20.

At the direction of council members, Foote removed language from the ordinance that would have prohibited the dispensaries from using the term marijuana or its synonyms, or depictions of the plant, in its advertising. However, the same prohibitions remain in place for signs erected by the owners of the dispensaries.

The final draft of the ordinance also opens the possibility of permitting a third marijuana dispensary in the city - where two dispensaries already are operating - if it is organized as a cooperative.

The new language redefines the definition of medical marijuana to include growing or otherwise manufacturing marijuana, Foote said. The implication is that if an unrelated party was growing marijuana specifically to provide product to one of the licensed dispensaries, the grower would not be operating within the provisions of the ordinance.

Finally, the ordinance authorizes the City Council to appoint a hearings officer to rule on alleged license violations by the dispensaries.

Although City Council would not rule on violations that could result in revocation of a permit, Foote said, it will continue to hear the required annual applications for renewal of the dispensary permits.