MMJ Puts Tax Collectors in Tight Spot

MMJ Puts Tax Collectors in Tight Spot
Posted by CN Staff on March 28, 2008 at 06:28:31 PT
By John Howard
Source: Capitol Weekly
California -- In a tight budget year, California wants every tax dollar it can lay its hands on. This year, those hands are reaching for marijuana.More than a decade ago, California voters approved the use of marijuana for medical purposes, making it legal under state law. However, federal law enforcers say marijuana use of any kind is illegal - and they are raiding clinics to prove their point. The state tax appeals board, which wants the sales taxes, is stuck in the middle.
"We're caught between a rock and a hard place," said Betty Yee, a member of the state Board of Equalization, which collects and distributes sales taxes on more than $553 billion worth of transactions each year in California on everything from corkscrews to Cadillacs. "We do not want to serve as aiding or abetting the (federal Drug Enforcement Administration). But they (the dispensaries) are not exempt from the sales tax, so by law we have to enforce it," Yee said. Yee's district encompasses all of coastal California from Santa Barbara to the Oregon state line and includes scores of marijuana dispensaries and thousands of medicinal users. Estimates vary wildly on just how much taxable marijuana is out there. The state, facing $16 billion in red ink through the middle of next year, wants precise numbers. So far, it doesn't have them. State authorities are quick to point out that collecting marijuana taxes won't balance California's books - but every penny helps. The Board of Equalization says it collected about $11.4 million in tax on some $142 million worth of medicinal marijuana sales in 2005-06, the most recent period for which numbers are available. That's likely a partial amount, because the board's taxation policy was adopted in October 2005, the final rule didn't go into effect until 15 months later, and it typically takes time to ramp up tax programs. About 200,000 people across California are authorized by their doctors to use marijuana for medical reasons. The drug costs about $40 for an eighth of an ounce. The sales of medicinal marijuana are tiny compared with other products, such as $20 billion in apparel sales and nearly $18 billion for office and school supplies. Even the smallest category - fuel and ice sales - among some four dozen listed by the tax board totals more than $414 million, nearly three times the level of the medicinal marijuana transactions. Marijuana vendors are listed as selling "general merchandise" - an attempt to give some anonymity to sellers who fear federal intervention. Americans for Safe Access, a pro-medicinal marijuana group that favors similar programs nationwide, says the state's figures are deceptive. The group surveyed a representative sampling of California dispensaries and tallied their sales, then multiplied that amount by the number of dispensaries in the state. ASA estimated the paid sales tax at about $100 million, and the amount of taxable sales at about $800 million. "This is a significant amount of money in a tough budget year," said ASA spokesman Kris Hermes. "We'd rather have the Board of Equalization be the entity that gives out that number, but they say it goes directly into the General Fund and there is nothing that requires the dispensaries to indicate what they sell. I hope over time that they will consider it, so it's not just us saying that we represent $100 million annually in sales taxes," Hermes added. A number of states have some form of medical marijuana law, including Washington, Oregon, Nevada, Alaska, Hawaii, Colorado, Main, Vermont, Rhode Island, Montana and California. Federal drug enforcers note that the use of marijuana is illegal, and they point to a 2006 U.S. Food and Drug Administration study stating that marijuana has no medical value. "It is unequivocally illegal under federal law," said Casey McHenry, a spokeswoman for the Drug Enforcement Administration. "Our job is to enforce federal law, and the distribution or cultivation of marijuana is in clear violation." California's position, determined by the 1996 passage of Proposition 215, is that the use of marijuana for medical purposes is legal. That, McHenry added, "doesn't affect what we do. We are still continuing to do our investigative work." Tracking medicinal marijuana sales has been murky for years. Sellers, fearful of federal investigators, are hesitant to disclose information to state tax officials, whose records may be subject to review by federal authorities. State tax officials know that, but they say the transfer of information is limited. "We do not have blanket information-sharing with different law enforcement entities, but in the event that there was a specific investigation going on, the Board of Equalization would be cooperative. But the board doesn't send information to the DEA as part of any kind of blanket agreement," said board spokeswoman Anita Gore. Still, those who dispense the marijuana are nervous about the role of the federal government. "That is a danger, and it is a vulnerability in the system. We've raised incrimination and vulnerability as important issues," Hermes said. Federal authorities, meanwhile, say income from marijuana sales is taxable and can lead to investigations of related criminal activities, such as money laundering. "With us, there is a potential for a criminal tax issue," said Arlette Lee, a spokeswoman for the IRS criminal investigations unit. And the feds note that income from any source, legal or illegal, is taxable. "Income, regardless of whether the source is legal or illegal, is taxable," Lee said. Source: Capitol Weekly (Sacramento, CA)Author: John HowardPublished: March 27, 2008Copyright: 2008 Capitol Weekly GroupContact: news capitolweekly.netWebsite: http://www.capitolweekly.netAmericans For Safe Access Medical Marijuana Archives
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Comment #11 posted by afterburner on March 29, 2008 at 14:19:24 PT
Max Flowers #10
AOL reported today that a "marijuana" grower tried to deduct a spoiled crop from his business earnings. The IRS ruled that he could not deduct anything because the source of income was illegal. It seems to me that the feds can't have it both ways. If illegal income is taxable, then deductions should also be allowed.
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Comment #10 posted by Max Flowers on March 29, 2008 at 10:09:51 PT
The IRS lies
"Income, regardless of whether the source is legal or illegal, is taxable," Lee said.This is a LIE. It is the big lie that the IRS bases all its fraudulent activities upon. It can be demonstrated and proven, by using any computer, that U.S. Income tax has been fraudulently imposed. According to the code, only "foreign earned income" is actually taxable income. Most Americans owe nothing! Results are precise, and "code" does not lie.Check it out here: and if you really want to learn what's up, read the entire site 
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Comment #9 posted by John Tyler on March 28, 2008 at 19:14:29 PT
it's time
Legal Cannabis could save California from its budget woes if the politicians would just let it happen. 
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Comment #8 posted by freewillks on March 28, 2008 at 17:27:50 PT
OT: Dude where's my Gun
How do Drug Enforcement Administration special agents lose their guns? Faster than ever, according to a new report from the Department of Justice inspector general. From 2002 to 2007, DEA lost 91 weapons, the audit found. The DEA isn't always reporting the losses of weapons or laptop computers to the proper authorities, and when it does, it often comes weeks -- even years -- after the fact. Story 
Gun, Computer Losses Plague DEABut just how do the guns disappear? Let us count the ways. "Special agent left weapon on roof of car and drove off," reads one incident description. In his report released today, Inspector General Glenn A. Fine included descriptions of how each weapon was said to have been lost. "May have fallen into trash basket at work," read another. "Left weapon in supermarket." "Left weapon on airplane." One report sounded like it was filed by an agent on Larry Craig patrol, "Left weapon in airport restroom."
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Comment #7 posted by RevRayGreen on March 28, 2008 at 15:11:59 PT
Game on
for States to clash with the Feds. Looking forward to the debate. People(Feds and the growing minority prohibitionista we battle)just need to accept it.
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Comment #6 posted by Yanxor on March 28, 2008 at 15:04:43 PT
Legal or illegal, its taxable
Ahahaha, oh gosh. Wait wait, so should I pay my dealer that extra 6% or do I send a check to the IRS for all the "interest" the cannabis seeds yielded?What hypocritical crap. Just another outrageous law intended to punish people multiple times for one crime.At one point of time, this kind of bullshit would have generated a revolution.
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Comment #5 posted by OverwhelmSam on March 28, 2008 at 10:02:50 PT
Marijuana Law Meltdown
Happening right before our eyes. Woo Hoo!And now with jury nullification being hotly debated all over the internet, the People will enforce their right to judge laws and government in the jury pool.
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Comment #4 posted by dankhank on March 28, 2008 at 07:59:29 PT
laudable riposte's all ...
legal, historical and practical economics which I add ...Why do we cage Humans for using a plant?
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Comment #3 posted by goneposthole on March 28, 2008 at 07:33:46 PT
Grow Cannabis
That's what the state of California should do. They could sell it, all of it. It would be gone in a day. There it was, gone. Don't just tax it. Grow and sell it. It is a cash crop, a cultivar. Much to the dismay of the feds, that's what it is.I will guarantee the results. It will be sold and the state of California will have money in the bank. There will be plenty of people willing to work to help the cannabis crop grow to full maturity, without a doubt. People will stay instead of leaving in droves like they are now. For every one person moving to California, five are leaving.The good folks who govern in California will be amazed. Who cares if it is illegal income, the money still spends.Is GM making money? No, they can't make any money to save their souls.Is Bear Stearns making money? No, they're broke.America needs some good news, a little ray of sunshine. Cannabis can do it.
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Comment #2 posted by museman on March 28, 2008 at 07:31:56 PT
the greatest countery
"Taxation without representation!" was once a battle cry of some country that dreamed of liberty and freedom. Wonder what happened to that country?
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Comment #1 posted by dongenero on March 28, 2008 at 07:14:32 PT
"And the feds note ........
.......that income from any source, legal or illegal, is taxable."I suppose that puts our Federal government in the organized crime business. How appropriate.Oh yes, who's the greatest country on earth?
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