IRS auditing California medical marijuana dispensary

February 25, 2011
By Cannabis Law Group on February 25, 2011 3:11 PM |

The San Jose Mercury News reports that the Internal Revenue Service is auditing the 2008 and 2009 tax returns of a medical marijuana dispensary in Oakland.

Our Los Angeles medical marijuana defense lawyers frequently report on the conflict between state and federal law when it comes to medical marijuana, which remains illegal under federal law. Of increasing concern is the issue of non-profit and for-profit status. State law requires medical marijuana collectives to maintain non-profit status. However, cities are increasingly seeking to tax the industry, despite prohibitions against levying taxes on nonprofits.
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Further complicating the issue is the fact the dispensaries must file for non-profit status, something many have been hesitant to do since it is an admission to selling illegal narcotics under federal law.

As we have reported on our Marijuana Lawyer Blog, some at the state level are calling for legislation to clarify a dispensary's reporting requirements. While the Obama Administration has announced enforcement of federal drug laws is not a priority in states that have legalized medical marijuana, IRS prosecutions are often used by federal authorities as a punitive measure, including the prosecution of famed mobster Al Capone.

In this case, Harborside Health Center, which has locations in Oakland and San Jose, serves 70,000 medical marijuana users. The Oakland location handles $22 million in transactions each year.

The Bee reports that the outcome of the audit could determine whether federal authorities treat medical marijuana dispensaries as legitimate businesses or as drug traffickers.

The CANNABIS LAW GROUP offers experienced and aggressive representation to the medical marijuana industry in Southern California-- including growers, dispensaries and collectives, patients and those facing marijuana charges. Call 714-937-2050 for a confidential consultation to discuss your rights.