Legal Pot Sellers Face 75% Tax Rate
No one in their right mind would put legal marijuana dealers on par with cocaine smugglers, says Adam English on the Wealth Wire. Unfortunately, the Internal Revenue Service (IRS) decided it will.
All of the problems are coming from a modification to the tax code back in 1982. Section 280E was added after the IRS went after a cocaine smuggler’s ill-gotten profits. The trafficker responded by filing a tax return and took deductions for expenses including the guns he used to protect his shipments, the yachts he used for smuggling and the bribes he paid to foreign officials, according to English.
The tax code modification fixed the problem but created a new one thirty years later. The IRS has decided that medical marijuana businesses are affected by 280E and the taxes are retroactively due. Now the IRS is aggressively auditing the businesses for crippling back taxes.
All of the everyday deductions used by businesses are being denied. Rent, payroll taxes overhead deductions and just about everything else are affected. Strangely enough though, the only things allowed to be written off are the cost of purchased marijuana and marijuana products, rent for property used to marijuana, payroll for workers that do the cultivation and equipment purchased for the purpose of cultivating marijuana.
The total bill for these businesses that are certified and legal on the local and state level can easily reach a staggering 75% effective income tax rate.
As noted in a CNN article, 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, she was handed a $300,000 tax bill from the IRS for the back taxes from the three proceeding years.
He reported that his clients often face effective tax bills of 65% to 75%, as compared to 15% to 30% for most other businesses.
Unless Congress moves to redefine the current law, the IRS will continue to aggressively audit the businesses because federal law maintains no mention of medical marijuana or any exemption for it.
With the bizarre nature of allowable tax deductions and a brewing battle between federal law and state rights, it is clear the issue must be addressed in some regard. The disparity between local, state and federal law is putting businesses that are doing everything to be licensed and above-board in a bizarre legal limbo.
“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.”
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Whistler Blowers, Insiders
……..Government THEFT!!! Period.
Ok, fair. But then you can’t use the roads, or anything else that is built using taxes….. No more water filtration, no more garbage pickup, and much more. You can stop paying taxes, but then you don’t get to use any of those things. Also, where do you think your welfare money comes from?
Welfare. I am self supporting.I pay fuel tax and food tax.
Welfare? I am self supporting. I pay fuel tax. I pay food tax.
i hate when people don’t know what the hell they are talking about. taxes collected by the IRS don’t fund roads, filter water or pickup garbage. gasoline taxes fund roads and you have a water/sewer bill that funds water filtration and garbage pickups.
honestly, if you really want to get down to the nuts and bolts of what the revenues the IRS pays for, it pays for nothing but the interest on our national debt. the IRS brings in just a bit over 1 trillion dolalrs and our interest is just over 1 trillion dollars.
keep in mind also that companies like GE that made over 15 billion in profits last year didn’t pay a dime in taxes to the IRS.