[ExI] now this, from the legal department...
spike66 at att.net
Fri Jul 11 20:48:32 UTC 2014
IRS Fines Marijuana Merchants for Refusing to Commit a Felony
<http://reason.com/people/jacob-sullum/all> Jacob Sullum|Jul. 11, 2014 2:21
State-licensed marijuana stores, which began serving recreational customers
in Colorado at the beginning of the year and in Washington this week, are
criminal enterprises under federal law. But as
Capone could have told you, Uncle Sam still wants his cut: Selling marijuana
is a felony, and so is <http://www.law.cornell.edu/uscode/text/26/7201>
failing to pay taxes on the money you earn by selling marijuana. The
government does not make it easy to comply with federal tax laws, however.
<http://www.law.cornell.edu/uscode/text/26/280E> Section 280Eof the Internal
Revenue Code, for example,
marijuana merchants from deducting standard business expenses (although they
are, rather counterintuitively, allowed to deduct the "cost of goods sold,"
including the cost of growing or obtaining marijuana). And when a business
pays federal taxes withheld from employees' paychecks, along with the
employer's share of payroll taxes, the Internal Revenue Service insists that
it be done via the Electronic Federal Tax Payment System (EFTPS), which
requires a bank account. Cannabusinesses
trouble obtaining bank accounts, what with being criminal enterprises under
federal law. The IRS does not consider that a good excuse, so when marijuana
merchants pay the monthly taxes in cash, they are charged a 10 percent
penalty. That is how
Allgreens, a Denver dispensary, ended up
-paying-federal-payroll> owing the IRS more than $20,000 in penalties.
In a <http://cloudfront-assets.reason.com/assets/db/14051026605179.pdf>
petition filed last month with the U.S. Tax Court, Allgreens argues that the
IRS should waive the penalties, as permitted by law "for reasonable cause,"
because the store's inability to make electronic payments is "due to
circumstances completely outside of [its] control." After all, writes
Allgreens' lawyer, Rachel K. Gillette, "the taxpayer is unable to secure a
bank account due to the nature of its business, which is explicitly legal
under Colorado State law. With no bank account and no access to banking
services, the taxpayer is simply incapable of making EFTPS payments or to
utilize the EFTP System."
The IRS argues that businesses like Allgreens have other options. For
example, "Taxpayer may use a currency exchange/same-day loan establishment,
to convert cash (often times for a fee) into a money order to deposit and
then use a financial institution to complete a same-day wire transaction
(often times for a fee)." Alternatively, "Taxpayer may utilize/authorize a
third party such as a tax professional, accountant, payroll service firm,
etc., to make the deposit on their behalf. Using the third party service,
the deposit is made through the batch provider software using the third
parties' bank account."
The problem, as Gillette points out, is that such tricky maneuvers can be
treated as <http://www.law.cornell.edu/uscode/text/18/1956> money
laundering, a crime punishable by up to 20 years in prison under federal
law. "An alternative should not force a taxpayer to engage in a potentially
unlawful activity under a federal statute," she writes, concluding that "the
IRS's decision in this case is arbitrary and capricious."
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