|Drop your pants and bend over - The IRS is coming for you if you |
dare to offer a state approved and licensed alternative medical product.
The IRS used as a Political Weapon
Legal medical businesses that are not "approved" by the all-powerful centralized Federal Big Brother state are hit with income tax rates of up to 75%
- Under the Bill of Rights a state has the right to make their own local laws without the other 49 states ganging up on them through a dictatorial Federal government.
- Major banks avoid working with those in the legal marijuana industry, because they fear Federal agencies will charge them with drug racketeering and money laundering.
Both Conservatives and Liberals should stand up against unconstitutional Federal attacks on the legal medical marijuana industry using the IRS as a political weapon to beat the states into submission with income tax rates of up to 75%.
The hefty levy is the result of a 1982 provision to the tax code, known as 280E, that stemmed from a successful attempt by a convicted drug trafficker to claim his yacht, weapons and bribes as businesses expenses, according to 280E Reform, a group working to overturn the statute.
Enacted in the wake of that PR debacle, the rule bars those selling illegal substances from deducting related expenses on their Federal income taxes reports CNN Money.
It may have been effective against cocaine dealers and smugglers of other drugs, but the law now means purveyors of medical marijuana in the 18 states that have legalized the drug can't can't take typical things like rent or payroll as a business expense. That's taking a heavy toll on this new field.
"I'd personally love to give my employees a raise," said Kayvan Khalatbari, co-owner of Denver Relief, a medical marijuana center in its namesake city. "But because of the industry we're in, that's not always possible."
Khalatbari said Denver Relief does just over $1 million a year in sales, and that not being able to take some standard business deductions costs him tens of thousands of dollars annually. He estimates his effective federal tax rate is about 50%.
For Denver Relief -- one of the largest marijuana dispensaries in Colorado, with a full-time staff of 15 -- the burden isn't killing the business. But for others, it's been lethal.
Jim Marty, an accountant in Colorado specializing in medicinal marijuana tax law, said he has one client that didn't turn a profit in 2009, 2010 or 2011. In 2012, though, she was handed a $300,000 tax bill from the IRS for those three proceeding years.
Entrepreneurs whose businesses are legal under state laws are getting hammered by outdated federal tax rules.
"If you have a license from the state hanging on your wall, that doesn't fit the definition of trafficking," Marty said. "Yet the IRS is aggressively auditing this industry."
He said he often sees clients facing effective tax bills of 65% to 75%. That compares to 15% to 30% for businesses in general.
The Internal Revenue Service did not respond to a request for comment.
In a letter to a congressman in 2011, the agency said it was merely enforcing the law, and that Congress needs to change the law if it does not want medicinal marijuana dealers caught up in the provision.