IRS ruling strikes fear in medical marijuana industry

[Freddie Stubbs]

Source: MSNBC

In a potentially crushing blow to the burgeoning medical marijuana industry, the IRS has ruled that dispensaries cannot deduct standard business expenses such as payroll, security or rent.

Harborside Health Center, one of the nation's largest medical marijuana dispensaries and considered a model for the industry, is on the hook for $2.5 million in taxes from 2007 and 2008. That is $2 million more than the Oakland, Calif.-based company paid for those tax years.

“I see only two outcomes here,” said Steve DeAngelo, director and chief executive of Harborside. “Either this IRS assessment has to change or we go out of business. There really isn’t a middle ground for us.”

DeAngelo says the ruling will likely be appealed. He has 90 days to respond to the ruling.

Read more: http://bottomline.msnbc.msn.com/_news/2011/10/05/8153459-irs-ruling-strikes-fear-in-medical-marijuana-industry

[slackmaster]

1. Fed .gov holds you liable for income tax on earnings from activity it considers illegal

But you can't take deductions for standard business expenses on the exact same activity.

:crazy:

[Warpy]

11. The whole drug war had to be based on tax law, so this is nothing new

and a lawsuit will determine whether or not the IRS gets to pick and choose whether businesses get to deduct business expenses. It need to be made clear that this sort of arbitrary ruling can be used against other businesses the IRS PTB decide they don't like. Alcohol and tobacco come to mind.

The drug war is unconstitutional and that's been known from day 1.

[ixion]

13. exactly.

[Sgent]

18. Not quite

You CAN take business deductions for most illegal activities, just not ones related to drugs.

If I'm a prostitute, then any related expenses (condoms, specialized clothing, etc.) are allowable deductions. However, baggies for a drug dealer are not allowable since they relate to drugs.

[slackmaster]

20. There's a fundamental flaw in the example you used

Prostitution is not illegal under federal law. It's covered on military bases by the UCMJ, and interstate commerce in women is covered by the Mann Act, but for ordinary prostitution within a single state the federal government doesn't care.

[msongs]

2. smoke pot bad, murder lots of people good. Obama has his priorities screwed on backwards nt

[RKP5637]

8. That, and on a number of things, this is just one more on a long list IMO. n/t

[RainDog]

3. the federal govt must really love those criminal cartels in Mexico -

I mean - they gave them weapons - now they're trying to kill their competition.

they refuse to let veterans have tests on the value of cannabis for PTSD, despite good results from lab tests in Israel -

they lie about the medical value of cannabis, in spite of reams of research over decades.

[RKP5637]

7. Keeping it criminal means big profits for them... enforcement, prisons, weapons, lawyers, a slew of

profits. Also, no way does big pharma want it legal, it has very little to do with what is good for humans, only the profits count. In fact, much of what this country does has little to do with what's good for humans.

[Nihil]

17. And we all know that "big profits" means happy politicians ...

... because big profits mean big bribes oops "campaign contributions" ...

Happy happy hope and change!

:argh:

[Uncle Joe]

4. Just another example of the draconian, dysfunctional insanity promoting the "War Against Drugs"

They; have become so far out of touch with the needs and wants of the American People as to be on another planet.

Thanks for the thread, Freddie Stubbs.

[RainDog]

16. this quote sums up the problems with the WoD

I found it on a discussion of issues of criminality and why crime has remained low in certain sectors of the population in spite of the rise in unemployment (in relation to inner cities) regarding something studied in criminal justice called the "legitimacy theory."

from Randolph Roth:

“If people believe that their government shares their values, speaks for them and acts on their behalf, they feel empowered, have greater self-respect and gain confidence in their dealings with people outside their families. When people feel that the government is antagonistic toward them and they question its legitimacy, especially on the national level, they can feel frustrated, alienated, and dishonored.”

Since cannabis is safer than alcohol or tobacco, has medical value, has never caused a death by overdose, has been legal throughout human history for far longer than it has been illegal - has a honorable cultural history in the U.S. and around the world as a plant that has aided in the growth of civilization via its uses in a variety of manufactured products (paper, rope, sails and more...)

The current policy in the U.S. regarding cannabis has led me to lose confidence in this nation to act rationally - the U.S. govt dishonors the American people by forcing cancer patients to become criminals in order to use a medicine, and when it stops a husband and wife from having a quiet moment together at the end of the day and unwind in a way they would choose that does NO HARM to anyone else.

I have no respect for those who are promoting this putrid fight against a plant.

It's like creationism in its level of stupidity.

[Uncle Joe]

21. That's an excellent post, Raindog, I couldn't agree more.

:thumbsup:

[Warren DeMontague]

5. Oh For Fuck's Sake.

Yes, anything to keep cancer grannies from easing their chemo nausea.

[Xithras]

6. This has been the subject of a lot of MM discussion for months.

If I own a regular business where my product costs me $50, and I sell it for $75, I pay taxes on $25 because that was my profit.

With marijuana, if the product costs $50, and I sell it for $75, the IRS wants me to pay taxes on $75.

A dispensary CAN survive in this situation, but it will require a fairly massive increase in the prices they charge. It is incredibly easy to get a MM card in California, and dispensary prices are generally 20% to 50% higher than street prices, but our street dealers are still doing fine. Why? Because a lot of people don't want to pay the price premium. What will happen if that premium jumps to 200% to 500%? If you can get a half ounce of Maui Wowie for $150 on the street, and that same half ounce of Maui Wowie costs $300 in a dispensary, where are most people going to buy it from? Some dispensaries will survive, but their numbers will dwindle greatly because only those who really care about it being legal are going to spend the extra $$

[Sgent]

19. Unfortunately

this can only be changed by an act of congress.

Every other activity you can name gets to deduct expenses from their revenues to get taxable income -- except the drug trade. Even other illegal activities can deduct expenses. This is a specific act of congress so the IRS really has no leeway.

[joeglow3]

23. Is it truly limited to drugs only?

Can you cite the code section?

[Sgent]

25. § 280E. EXPENDITURES IN CONNECTION WITH THE ILLEGAL SALE OF DRUGS

No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.

[Lionessa]

9. Oops, he did it again.

Is that because it's not legal nationally? I've never heard of a business not being able to deduct normal business expenses. Even the ACORN prostitute bullshit, showed us that prostitutes could in fact properly file a business and pay taxes with consideration from their expenses I would imagine...but I guess they don't register as prostitutes but as creative dancers, or masseuses, or some other "legal" entity.


This just sucks. I thought Obama said he was going to stop harassing med pot related folks.

He thinks nothing of ignoring the constitution to kill American citizens without even so much as a trial in absentia, gives unconditional bailout monies to people who have bankrupted the country and perhaps began the collapse of many countries, let's war criminals remain entirely free of burden, makes military excursions into countries we have no claim of war against, ....

I didn't think he could be anymore of a disappointment than I already thought he was, but hey he did it again.

[kestrel91316]

10. OCCUPY IRS AND DOJ.

[meow mix]

12. they get to make rules up in thier own favor, as they go along. democracy in action

:banghead:

[Trillo]

14. This is proof government knows how to reign in corporations.

Simply make them follow the same rules private citizens are required to follow. Can't deduct food costs, rent costs, an entire variety of expenses. But "approved corporations" have all of those and more.

[frylock]

15. accidental unrec..

fuck these assholes.

[krabigirl]

22. I guess they will just stop paying taxes. Sounds like a good idea really.

[Sen. Walter Sobchak]

24. But... but... but...

I thought the windfall from taxing marijuana was supposed to solve all this nations budget woes...

[and-justice-for-all]

26. The continued criminalization of marijuana only makes things WORSE..nt