The Victoria founder of the Cannabis Buyers' Club of Canada has been hit with a $150,000 tax bill for not paying the HST on his medical marijuana sales.

Ted Smith says his club sells $2.5 million in medical marijuana annually, but he didn't think it had to pay HST. Last May, the taxman came to set him straight.

Smith says he will now have to pay six months worth of HST payments and some employee deductions.

"They're not asking me to submit for years past, and they're not fining and penalizing me. What they really want is for the club to be in compliance."

Smith says he is personally responsible for the $150,000 tax bill, so he'll pay it out of his own pocket.

"I'm the one that went this long without paying taxes or doing anything about it, and I don't think it's fair for the membership to have to pay."

Club to be restructured

He says for the past 16 years, he has run the Cannabis Buyers' Club of Canada as an informal co-op, so there are no actual assets for Canada Revenue Agency to go after.

"There is no other organization to go after. The Buyers' Club is unincorporated. There are no bank accounts.There's no society. It's just me. So, yeah, this is my personal bill."

Smith says the club will be turned into a non-profit society whose books will be open to its members. And he'll be cutting formal ties to the club and will no longer draw his salary of $2,000 a month.  

"It's kind of a relief because people have been speculating that I have been making money off this and I haven't. The most expensive thing I have is the gold tooth in my mouth."

Earlier this year, Smith did win a legal victory when a B.C. Supreme Court judge struck down a section of Canada's medical marijuana laws that said licensed users cannot possess pot cookies or marijuana body creams.