Medical marijuana's days may be numbered.??With a true double whammy, the IRS and federal prosecutors are both using weed killer.? California's federal prosecutors an aggressive? to shut down dozens of pot dispensaries.? See .? If that's not enough, then there's the IRS.?
Legal medical marijuana dispensaries have tax problems and they're getting worse.? Harborside Health Center alone has a .? Dispensaries are slapped with IRS tax bills, taxed on gross income, not net!? That means no deductions for rent, telephone, advertising, wages, you name it.? Talk about seizure!
recognize medicinal marijuana and allow its sale.? But since federal law has not conformed, the drug law mismatch directly impacts taxes.? The IRS claims to only be the messenger, telling it can't deduct its expenses.?
The?culprit is?the tax code, since disallows any business deductions---no matter how legitimate---incurred in trafficking in controlled substances.? What's controlled?? Federal law---the ---governs.? Medicinal or otherwise, marijuana is on the list.? Even the U.S. Supreme Court says there's no exception, even for medically necessary marijuana.? See .? ?
Members of Congress including Representatives (D-CA), (D-CA), (D-CO), (D-AZ), (D-CA) and ?(D-MA) have sent to the IRS about taxing medical marijuana and the IRS issues predictable in response. ?In states that allow pot dispensaries for medicinal use, how is it remotely fair for dispensaries to be taxed in a confiscatory way?
The tax law should be changed, but in the interim, my favorite way around this unjust snafu is other lines of business.? Don't just dispense medical marijuana, the law seems to say.? A U.S. Tax Court ruling says marijuana dispensaries can legally deduct expenses associated with all activities except dispensing marijuana.? See .??
Expenses of selling marijuana may be verboten, but the dispensary was also engaged in the business of care-giving.? All those expenses were OK.? It turned out only about 10% of the premises were used to dispense marijuana, so most of the rent was deductible.
For more, see:
Robert W. Wood practices law with , in San Francisco.? The author of more than 30 books, including Taxation of Damage Awards & Settlement Payments (4th Ed. 2009, ), he can be reached at .? This discussion is not intended as legal advice, and cannot be relied?upon for any purpose without the services of a qualified professional.
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