Before we all partake of the high holiday of 4/20, there is another annual event that isn’t so joyous to stoners – or anyone else for that matter – Tax Day. Sure it’s extended three days this year until April 18, but it’s coming just the same. But at least when you pay your taxes, you expect the Internal Revenue Service (IRS) to play fair. However, when it comes to the federal government’s war on medical marijuana, the IRS’s latest tactic could land a deathblow to medi-pot dispensaries across the USA.
As reported in March by The American Independent, at least 12 dispensaries in California were audited by the IRS based on the decision that past dispensary business deductions were invalid due to a clause in the federal tax code that prohibits businesses trafficking in Schedule I or II drugs from making tax deductions.
Marijuana is a Schedule 1 drug according to the federal Controlled Substances Act (CSA), meaning it has no accepted medical use in treatment – despite the fact that the Feds annually provide medical marijuana to a select group of patients and certain government agencies have endorsed medicinal cannabis just in the last year.
NORML Executive Director Allen St. Pierre likened the Feds’ approach to the means by which they ultimately jailed notorious Chicago gangster Al Capone – for tax evasion, not for all of his bootlegging and violent crime. Substitute illegal (in the Feds’ view) marijuana today for illegal alcohol back in the day, and history is repeating itself once again.
The crucial case here involves the Marin Alliance for Medical Marijuana (MAMM), operated by prominent Bay Area cannabis activist Lynette Shaw. MAMM was the first dispensary to receive a final audit decision from the IRS, handing Shaw a mind-boggling bill for $800,000 in back taxes owed – just for 2009, and informing her in total, MAMM owes “millions and millions” of tax dollars to the government.
Shaw intends to file an appeal in U.S. Tax Court by May. In 2007, a San Francisco dispensary had their tax payments sliced to just over one percent of what the IRS claimed it owed. Shaw’s taxes could be similarly reduced, but even if the Tax Court rules against her, Shaw would welcome a challenge in a court of appeals, because a victory there would ensure that the threat of IRS audits of any dispensary would be meaningless.
Shaw will base her case on the premise that the IRS is applying standards of illicit drugs to a medicine that has been legalized by state governments. She also intends to contest the Schedule I classification of marijuana that permitted the IRS to audit the dispensaries. To that end, Shaw will find it most difficult to win; as St. Pierre noted, no judge is going to overturn the CSA. But on her other points, perhaps Shaw can protect medical marijuana dispensaries from fading away, just as they are becoming part of the commercial and cultural mainstream in states like California and Colorado.
Among the bitter ironies of these audits is that dispensaries are paying more state and local taxes than ever, and that if the IRS wins, the taxes they’ll collect from MAMM and other dispensaries will be used to fund the very anti-medical marijuana efforts that threaten to destroy the dispensary model.