city records show dave hodges has been noncompliant for four years.than a half million dollars in unpaid taxes in penalties. >> i want to pay sales tax but by paying sales tax i'm admitting that i'm selling marijuana, which is violating the law. >> reporter: he's referring to federal law, and the conflict with state laws. hodges and other owners point to this language at the top of san jose's marijuana business tax return. it includes payment of the tax does not authorize unlawful business. >> it's lawful to say you can sell marijuana, we would gladly pay sales tax. but the law done say that. >> reporter: this is a semantics nightmare. >> it is. just needs to be cleared up. >> reporter: worried the city will come and lock your doors? there you know, it's been a concern of mine ever since i started five years ago. >> reporter: what happens your message to these businesses? >> pack up, it's time to move on, and pay up on your way out. i would say to the mayor that he won by 2,000 votes. and that there's a large population in the city of san jose who wan

. >> dave hodge hodges founded one of the first collectives. >> would you be surprised if i told youe got a medical marijuana card with the condition of heartburn? >> no. actually it wouldn't surprise me at all. >> do you think that's legit? >> that's one of the reasons we need legalization. >> that's where many now believe california is headed. back to the ballot box will legally clear up any confusion between the current law and what voters approved in washington and colorado. >> we really have recreational marijuana legalized already in this state? it's pretty close. and that's probably one of the reasons we don't have legal marijuana, recreational marijuana right now because is laws are so close to that that most californians feel it already is legal. >> is this in essence prove there's not a lot of difference between california and colorado and washington? >> there are more obstacles to getting it but i think we all agree it's recreational marijuana at this point. >> here in california? >> at least given the way that many dispensaries operate, yes. >> next year california voters

city records show dave hodges has been noncompliant for four years.an a half million in unpaid tax and penalties. >> i want to pay sales tax. but by paying sales tax, i'm admitting that i'm selling marijuana, which is violating the law. >> reporter: he is referring to federal law and the conflict with state laws. hodges and other pot shop owners also point to this language at the top of san jose's marijuana business tax return. it includes payment of the tax does not authorize unlawful business. >> now, if the law were to say you can sell marijuana, we would gladly pay sales tax. but the law doesn't say that. >> reporter: by all indications, this is a semantics nightmare. >> it is. it just needs to be cleared up. >> reporter: are you worried the city is going to come and lock your doors? >> you know it's been a concern of mine ever since i started five years ago. >> reporter: what is your message to these businesses? >> pack up, it's time to move on. and pay up on your way out. >> i would say to the mayor that he won by 2,000 votes. and that there is

. >> reporter: dave hodges owns the all american cannabis club. >> it sin colluded on the menu. >> well she is misinformed, and that is a conversation that we need to have back at the shop. >> reporter: and the truth is that they have never paid marijuana business tax to the city of san jose. and city records show that he has been noncompliant for four years and more than a half million in unpaid taxes and penalties. >> i want to the pay the sales tax, but by paying the sales tags, i am admitting that i am selling marijuana, and that is breaking the law. >> reporter: and so he point s to this language at the top of san jose's marijuana business tax return which includes payment of the tax does not authorize unlawful business. >> now it is lawful to say that you are going to be selling marijuana and then we would gladly pay the sales tax. >> this is a semantic affair. >> yes, it is. >> reporter: are you worried that the cities will lock up your doors? >> yes. >> reporter: what is the message? >> pack up and move on and pay on the way out. >> i would say that the mayor won by 2,000 votes,

. >> reporter: dave hodges founded one of the first cannabis collectives in san jose. would you be surprised if i told you that we got a medical marijuana card with the condition of heartburn? >> no, actually, it wouldn't surprise me at all. >> reporter: do you think that's legit? >> that's one of the reasons we need legalization. >> reporter: and that's where many now believe california is headed back to the ballot box to legally clear up any confusion between california's current law and what voters approved in washington and colorado. >> do we really have recreational marijuana legalized already in this state? >> it's pretty close. and that's actually probably one of the reasons we don't have legal marijuana recreational marijuana right now, is because the laws are so close to that that most californians feel that it already is legal. >> reporter: does this in essence prove there's not a whole lot of difference between california and colorado and washington? >> well, there's more obstacles to getting recreational marijuana, but i think we all agree it's recreational