The IRS War On Medical Marijuana Dispensaries

IRS War On Medical MarijuanaCongressional Republicans (with the Obama administration’s bipartisan support) are all for using the IRS to target and decimate one sector of the U.S. economy — medical marijuana providers. Alternet reports:

The IRS employs Section 280E, a 1982 tax code addition that was a response to a drug dealer’s successful effort to claim his yacht, weapons, and even bribes as business expenses. Under 280E, individuals involved in the illicit sale of controlled substances — including marijuana, even medical marijuana in states where it is legal — cannot claim standard business expenses on their taxes.

“The Obama administration is using Section 280E to push these local and state licensed medical marijuana dispensaries out of business,” said Kris Hermes, spokesman for the medical marijuana defense group Americans for Safe Access.

Most small businesses pay an effective tax rate of between 13% and 27% on net income, according to the Small Business Administration. With the unintended application of 280E, state-legal marijuana providers pay an average effective tax rate of 65-80%.

The provision can be used to great effect. Oakland’s Harborside Health Center was hit with a $2 million IRS assessment in 2011 after the tax agency employed Section 280E against. Harborside is fighting that assessment, even as it continues to try to fend off federal prosecutors’ attempts to shut it down by seizing the properties it leases.

280E reform is going to be an uphill battle. In the last Congress, Rep. Pete Stark (D-CA) introduced House Bill 1985, the Small Business Tax Equity Act, designed to end the 280E problem for medical marijuana businesses, but it went to the Republican-controlled House Ways and Means Committee, where it was never heard from again.

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  • DeepCough

    So it’s true: Obama hates small business owners.

  • BuzzCoastin

    keep pot underground
    who needs Big Buttinski Homelander & his Gestapo?

    • InfvoCuernos

      I agree, I wish my industry would get outlawed so I could make big bucks and keep their dirty little fingers out of my beeswax.

    • Juan

      I’m starting to agree.
      At first, I thought the whole medical cannabis thing in SoCal was pretty cool. The shops had regular hours, excellent weed and hot stoner babes working in those places. But after a while not so much. You know they charge $55 for an eighth? Sure it’s good, but still that’s just way too much. No way am I paying $400 for an oz at a dispensary, when I can get excellent quality, outdoor grown, organic herb from the Emerad Triangle for $200 an oz.
      Also, did not like paying $120 per year for a medical cannabis card. Fuck all that. The pigs will still take your weed and arrest your ass if they feel like it, card or not. Then you have go to court and plead not guilty. If you had an amount allowed for by the law, your case gets dismissed, but you do not get your meds back.
      Besides, if it gets totally legalized here, it’ll be harder for small independent growers to make any money.
      Better to just fly under the radar as much as possible.

      • kowalityjesus

        It is almost certainly a matter of time before you hit a terrain obstacle when flying under the radar, unless you are ingeniously good at it. I am still out on whether its a good idea to condone marijuana use by encomiastically recognizing its virtue through national legislation. As a libertarian, I would much rather it be a local and state issue, and as a former user I would rather it remain illegal but much less greviously punished in my locality.

  • Haystack

    They just need to start filing under names like “Marijuana Party Patriots” and it’ll be fine.

  • kowalityjesus

    It is so nice to be a tiny cog in the machine. I’m not important enough to be held accountable for real responsibilities and massive time-commitments, I get my passport approved in no time, and I don’t even earn enough money to pay income tax! I should apply for food stamps and complete the costume.