The smell gives the game away. A sweet herbal scent wafts from the medicines inside the smart display cases in the Harborside clinic in Oakland, California.

This is a marijuana dispensary, where the prescriptions have names like Super Silver Haze and Purple Trainwreck and customers need a “recommendation note” from a doctor.

Medical marijuana has become big business in California and the drug is approved for a range of conditions and for “any other illness for which marijuana provides relief”. In these straitened financial times, booming sales and healthy tax revenues mean that full legalisation of cannabis may be just around the corner.

The Harborside Health Centre — opened by Stephen DeAngelo, 51, in 2006 — alone employs 77 people, has 30,000 registered patients and brings in about $20 million (£12.4 million) annually in revenue.

Across California there are an estimated 2,100 dispensaries, co-operatives, wellness clinics and taxi delivery services in the sector known as “cannabusiness”. That is more than all the Starbucks, McDonald’s and 7-Eleven outlets in the state put together.

These dispensaries, with names like My Green Heaven Ministry, sell marijuana in bud and resin forms and offer other cannabis products, including hash cookies, cooking oils and bottled drinks.

In some high-end stores, there are pastry chefs to ensure the highest-quality cannabis baked goods. Most cannabis co-operatives, which produce their own plants, also sell potted plants and seeds for patients to grow their own medicine.

“People are choosing to become legal cannabis consumers because they don’t want to go out on the corners and deal with thugs and gangsters to get their medicine,” Mr DeAngelo told The Times.

Activists and business owners at last week’s annual conference of the National Organisation for the Reform of Marijuana Laws (NORML) in San Francisco are feeling more optimistic about the future of dope in America than they have for years — because they have economics on their side.

The recession has made the prospect of collecting taxes on marijuana sales as tempting as ending Prohibition was in the 1930s to many politicians.

Legalisation might bring state and federal governments about $7 billion annually in additional tax revenue, while saving them $13.5 billion in law enforcement costs, Jeffrey Miron, the Harvard economist, estimates.

In California Arnold Schwarzenegger, the Governor, who has had to cut services to handle a $24 billion budget deficit for the coming year, has suggested that legalisation should be considered.

Tom Ammiano, a Democrat California assemblyman from San Francisco, has introduced a Bill to treat marijuana like alcohol, taxing sales to adults while barring possession by anyone under 21. He estimates that this would generate up to $1.3 billion in revenues. There is also a voter initiative to put legalisation on a ballot in elections next year.

Many, such as Mr DeAngelo, see medical marijuana as the route to full legalisation. More than 70 per cent of Americans favour the use of medical cannabis. Allen St Pierre, executive director of NORML, said: “The vanguard of reform is medical access. The Baby Boomer generation grew up with marijuana and now have the reins of power. Every measurable metric is swinging our way.”

Already, dozens of dispensaries are opening in states from Oregon to Colorado to Rhode Island. Thirteen states have laws that allow patients to use marijuana, typically to alleviate chronic pain, deal with the effects of chemotherapy or even as an appetite stimulant. Fifteen states are considering similar legislation in the coming year.

Proposals by Mr DeAngelo — who uses marijuana to relieve pain from a degenerative disease — for Oakland’s four cannabis dispensaries to pay an extra sales duty have been adopted, making it the first place in America that collects a specific cannabis tax.

Mr DeAngelo estimates that the authorities will receive an extra $1 million next year. California required dispensaries to pay sales tax only in 2007. Conservative estimates put gross statewide medical cannabis sales at about $2.5 billion, generating taxes of about $220 million.

All this has occurred under a federal regime that still outlaws medical cannabis. Officially, the US Government has banned cannabis sales since the 1930s, but over the past decade or so the federal authorities have scaled down punitive action. In late February, Eric Holder, the Attorney-General, confirmed that federal raids and prosecutions would no longer be carried out against anyone complying with state medical marijuana laws.

Today California has up to 400,000 medical marijuana patients. About 600 came to Harborside for the drug each day, Mr DeAngelo said.

“It is good for insomnia, stress, anxiety and chronic pain.” And for the economy, he could have added.

Potted history

• Marijuana was used medicinally in the ancient world and has been in use in Eastern cultures for thousands of years. It was introduced to Western medicine by William Brooke O’Shaughnessy, an Irish physician, who conducted a cannabis experiment in 1830 while at the Medical College of Calcutta

• Cannabis was sold in the form of a powder or tincture early in the 20th century, but, as concern grew over its associations with crime and psychosis, it was steadily outlawed, then banned altogether by the US Government in 1937

• Some doctors object to the use of cannabis as a medicinal remedy because its effects can be unpredictable. Most pharmaceuticals are formed from a purified chemical compound. In contrast, marijuana, which usually consists of the dried, ground-up flowers of a plant, contains at least 400 compounds, including more than 60 cannabinoids, which have therapeutic effects. The proportions of these compounds vary greatly from plant to plant, and smoking — which allows cannabis to enter the bloodstream faster than ingesting the drug — seems to many to be an undesirable way to deliver medicine to sick patients

• There are pharmaceutical forms of cannabis on the market and companies are pursuing more reliable commercial chemical variants

• The US Drug Enforcement Administration (DEA) has ruled that there is no scientific justification for the medical use of marijuana. According to the DEA: “Legalisation of marijuana, no matter how it begins, will come at the expense of our children and public safety. It will create dependency and treatment issues, and open the door to use of other drugs, impaired health, delinquent behaviour and drugged drivers.” Despite this, the latest federal survey indicates that more than 100 million Americans have tried the drug at some point