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Legalization

IRS Penalizing Pot Shops Without Bank Accounts

Legal marijuana businesses without bank accounts are unfairly assessed a 10 percent penalty on federal employee withholding taxes they are required to pay electronically but are forced to pay in cash, according to a lawsuit challenging the practice.

That’s because the Internal Revenue Service requires all businesses to pay the quarterly tax by bank wire, an impossibility for hundreds of medical and recreational marijuana shops nationwide that are unable to obtain banking services.

And rather than waive the penalty for cash-only businesses paying the tax on time, the IRS advised the companies to avoid the assessment by using techniques that amount to money-laundering, according to a petition filed in US Tax Court.

In a case that could have enormous tax ramifications for hundreds of marijuana dispensaries nationwide, Allgreens LLC of Denver is challenging the IRS practice of collecting what amounts to millions of dollars in penalties the businesses are helpless to avoid.

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