Grijalva finally found a tax he doesn’t like: Taxes on pot!

| September 17 2011
Christopher Cook

Toking And Taxes Don’t Mix, Says IRS:

It’s not every day members of Congress get to write the IRS asking for help with a little drug problem.  Marijuana—for medical use—to be exact.  Not getting some, mind you, but taxing it more fairly.

The IRS has released a passel of letters it sent to members of Congress replying to the their letters about taxing medical marijuana.  The pot-tax-worried members included Representatives Sam Farr (D-CA), Linda Sanchez (D-CA), Jared Polis (D-CO), Raul Grijalva (D-AZ), Pete Stark (D-CA) and Barney Frank (D-MA).  The members of Congress have a point—if their states allow pot dispensaries for medicinal use, how is it remotely fair for dispensaries to be taxed in an arguably confiscatory way?

Wow, such a list of luminaries. Stark. Frank. Grijalva.

Frankly, I’m not even particularly concerned about the merits of the question right now. I just find it fascinating that people who rarely meet a tax they don’t love somehow get ruffled by a lack of tax deductions for medical marijuana dispensaries. Interesting to see where their priorities lie, n’est-ce pas?

And, as it turns out, the situation isn’t even that big a deal for at least some of the dispensaries:

 . . . some medical marijuana dispensaries squeak by the tax issues by having two lines of business and segregating their activities.

In fact, one U.S. Tax Court ruling says marijuana dispensaries can legally deduct expenses associated with all activities except dispensing marijuana.  See Californians Helping to Alleviate Medical Problems Inc. v. Commissioner.  Although this case disallowed the expenses of selling marijuana, it ruled that the dispensary was also engaged in the business of care-giving.  All those expenses were OK.  It turned out only about 10% of the premises were used to dispense marijuana, and that made most of the rent deductible.

Here comes the mighty Raul Grijalva to save legal weed dealers a few extra dollars in tax deductions.

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