Medical marijuana dispensaries in Los Angeles and elsewhere have more to fear than the Drug Enforcement Agency. Now our local businesses can even be shut down by the IRS.
The Internal Revenue Service has now made it procedure that these companies can no longer deduct the sales of marijuana from their federal taxes. They’re to follow a completely different set of rules than every other merchant in the U.S. Claiming these deductions for goods sold is the only way for them to do business.
The government continues to make it harder and harder for dispensaries and collectives to stay in business. Our Los Angeles medical marijuana attorneys understand that the local medical marijuana industry would just like to be treated like every other business on the block, following the same rules and regulations. Continuous hits from the government and Congress make that harder and harder every day.
As we recently reported on our Los Angeles Marijuana Lawyer Blog, dispensaries continuously get hit with financial burdens from greedy, money hungry government that has one goal, to put local companies out of business. In our recent post, a new bill was passed that now allows the city to tax marijuana businesses up to 10 percent. These taxes were allegedly going to be used to fund so-called essential city services such as emergency response, street maintenance, police, fire, pothole repair and other programs. What’s most alarming is that these companies already pay a 9.25 percent sales tax. This additional 10 percent tax is on top of the original 9.25.
These companies won’t have to fight alone. United States Congressman Pete Stark, (D-Fremont) recently introduced legislation that would amend the tax code. Dispensaries would be able to deduct the price of their product on their federal tax forms under his legislation.
“While unfair to these small business owners, the tax code also punishes the patients who rely on them for safe and reliable access to medical marijuana prescribed by a doctor,” Stark says.
Section 280E of the IRS code, passed in 1986, prohibits residents from deducting the “sale of illegal drugs” on their personal or business income tax forms. This law was not originally passed to affect marijuana, or the sales of, it was put into effect to punish those dealing cocaine.
The new bill, cosponsored by Rep. Dana Rohrabacher, (R-Huntington Beach), is referred to as “The Small Business Equity Tax of 2011”. This bill is a two-page report that details an exception to the current tax code. This report states that under the exception, “amounts paid or incurred in connection with the trade or business consisting of sales marijuana … intended for patients for medical purposes pursuant to the laws of a state” to be deducted from taxes.
Dispensaries around the nation, in states which allow the product of course, would just like to be treated the same as every other money-making company. It is the American dream, after all.
“A level playing field would be wonderful,” said Cathy Smith, one of the cofounders of HopeNet on Ninth Street. “Everyone else gets to take out deductions. [If the bill passes], I’ll go out and celebrate.”
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.