website stat The Great Marijuana Tax Robbery
The Great Marijuana Tax Robbery
Admin Add Dispensaries (TOTAL POSTS:141) 4/25/2021 5:21:44 PM

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Admin Add Dispensaries (TOTAL POSTS:141) 2/3/2017 8:12:17 PM

Update 5/25/2017

IRS trawling state-run pot database to block Colorado marijuana companies from claiming tax deductions

Industry says the IRS is conducting an unauthorized criminal investigation using seed-to-sale database and overreaching its authority

http://www.thecannabist.co/2017/05/25/irs-marijuana-tax-deduction-audit-colorado/80311/#disqus_thread

The former owners of one marijuana business, Total Health Concepts, have been among those fighting back, saying they’re entitled to claim a Fifth Amendment right against self-incrimination, leaving the IRS to find another way to prove the trafficking.

That case is ongoing and many in the industry have seen it as potentially ground-breaking if THC’s former owners – Kellie McDonald and Neil and Andrea Feinberg – can win. If you need cannabis marketing services click here. 


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Update 2/3/2017
 
As I predicted the real threat of Tax Paying Operators self incriminating them selves is here with the Election of Donald Trump
and his pick for Attorney General Jeff Sessions.


 On Election Day, eight states voted to legalize recreational or medical marijuana, bringing the nationwide total of medical states to 29. In Florida, medical marijuana won nearly 2 million more votes than Donald Trump. Added up, 65 million people now live in states that authorize adult recreational use; more than half of all Americans have access to medical marijuana; and almost everyone else lives in a state that permits CBD, a non-psychoactive component of cannabis that helps treatment of juvenile epilepsy. It’s easier now to identify the six states that have done nothing to end the prohibition on marijuana than the ones that are breaking away from the federal law that treats marijuana the same as heroin.

There was another winner on November 8, however, and he has thrown up a serious challenge to the seemingly inexorable march of legal marijuana. By nominating Senator Jefferson Beauregard Sessions III for attorney general, President-elect Donald J. Trump is about to put into the nation’s top law enforcement job a man with a long and antagonistic attitude toward marijuana.

Some of the things Jeff Sessions has said about Marijuana.

Good People Don't Marijuana.
I use to like the until I found out they smoked Marijuana.
Marijuana is a real Danger and should not be legalized.
And most recently the most sinister statement made during his confirmation hearing Sessions stated that CONGRESS SHOULD LEGALIZE MARIJUANA if they do not want the federal law to be enforced. 
See: 
https://www.youtube.com/watch?v=7jVaGH4XYSM

And here is the kicker Jeff Sessions has advocated for the DEATH PENALTY for drug dealers including marijuana if they get arrested the second time.

What is even more alarming is the Federal king pen drug law allows for the death penalty for anyone who who traffics more than 20 million dollars a year in a schedule 1 Narcotic. See: https://en.wikipedia.org/wiki/Capital_punishment_for_drug_trafficking

So now Trump and Sessions have Tax Records of thousands of business owners that can lock them up for life and in some cases execute them if they chooses to do so. Do you now understand why the Supreme Court Case of Timothy Leary vs the United States is so important?

So you think your safe because you pay taxes??? Read the story of Lance Gloor who is now in Federal Prison doing 10 years even though he paid taxes and had a business license. 
http://www.dispensaryexchange.com/read/3/113/The-Persecution-of-Lance-Gloor--A-Tax-Paying-Dispensary-Owner

Jeff Sessions and Marijuana

I THINK ONE OBVIOUS CONCERN IS THAT THE UNITED STATES CONGRESS HAS MADE THE POSSESSION OF MARIJUANA IN EVERY STATE, AND DISTRIBUTION OF IT, AN ILLEGAL ACT. . . . WE SHOULD DO OUR JOB AND ENFORCE LAWS EFFECTIVELY AS WE’RE ABLE.Attorney-General designate Jeff Sessions

Read more here: http://www.charlotteobserver.com/news/politics-government/article131132604.html#storylink=cpy
http://www.charlotteobserver.com/news/politics-government/article131132604.html
Admin Add Dispensaries (TOTAL POSTS:141) 8/6/2017 10:44:37 AM

https://www.marijuana.com/news/2017/08/ag-letter-to-wa-state-officials-cole-memorandum-allows-doj-enforcement/

Attorney General Jeff Sessions has some rather sobering concerns with the implementation of recreational marijuana in Washington State.

Washington State legalized adult-use marijuana by passing Initiative 502 during the 2012 general election. Now, almost five years after the fact, the country’s attorney general has officially put the state’s policymakers on notice.

Sessions, in a letter addressed to Washington State Attorney General Robert Ferguson and Gov. Jay Inslee, started off with a congenial tone that quickly devolved into a not-so-veiled threat.

“Thank you for your letters of February 15, 2017, April 3, 2017, and May 8, 2017, which I have attached to this letter as Exhibits A, B, and C for your convenience. I was pleased to read that you share my concern for public health and safety and my belief that the federal and state governments should work together to address our country’s concerns with marijuana. Congress has determined that marijuana is a dangerous drug and that the illegal distribution and sale of marijuana is a crime.”

Loaded with subtext, Sessions’ letter to Ferguson and Inslee explains, “The Department remains committed to enforcing the Controlled Substances Act in a manner that efficiently applies our resources to address the most significant threats to public health and safety.”

Voters in Washington State passed I-502 in 2012 with 56 percent of the vote. Since that historic moment, the state’s recreational marijuana industry has cultivated more than $2 billion in total revenue and more than $400 million in state taxes, purportedly following the regulatory structure outlined by the Cole Memorandum.

The AG’s letter cites findings from a 2016 report by the Northwest High Intensity Drug Trafficking Area (HIDTA) as a cause for concern.

  • Black and Grey market growth due to lack of regulation
  • Lack of regulation, oversight, and transparency
  • Interstate transportation of Washington’s marijuana
  • Underage participation
  • Driving while high
  • 17 extraction labs exploded
  • 54% increase in marijuana-related calls to State Poison Control Center Between 2012 – 2014

According to Sessions’ letter, “These findings are relevant to the policy debate concerning marijuana legalization. I appreciate your offer to engage in a continuing dialogue on this important issue. To that end, please advise as to how Washington plans to address the findings in the Northwest HIDTA report, including efforts to ensure that all marijuana activity is compliant with state marijuana laws, to combat diversion of marijuana, to protect public health and safety, and to prevent marijuana use by minors.”

A fan of states’ rights and federalism when he supports a specific ideology, Sessions seemingly loathes the fact that individual states have snubbed the federal government and legalized adult-use cannabis. Warned by Gov. Inslee that the Trump Administration and its Department of Justice would be “on the wrong side of history” for pursuing a policy of national prohibition, Sessions has continued to push the low-rent philosophy of prohibition for all.

Admin Add Dispensaries (TOTAL POSTS:141) 3/13/2016 4:14:08 AM

The Great Marijuana Tax Heist

 

  Taxation without Representation was one of the main reasons that our founding fathers went to war with the British. People in the American Colonies believed because they were not being represented in the far away British Parliament that tax laws on products such as the Sugar Act and the Stamp act were illegal under the Bill of Rights Law of 1689. Yet in the world of cannabis we see several states not only taxing Recreational Marijuana but Medical Marijuana as well.

  The main problem with paying taxes on marijuana sales is that cannabis it is still classified by the Federal Government as a schedule 1 narcotic punishable by imprisonment and even the death penalty as noted on the Normal website.

  The sentence of death can be carried out on a defendant who has been found guilty of manufacturing, importing or distributing a controlled substance if the act was committed as part of a continuing criminal enterprise – but only if the defendant is (1) the principal administrator, organizer, or leader of the enterprise or is one of several such principal administrators, organizers, or leaders, and (2) the quantity of the controlled substance is 60,000 kilograms or more of a mixture or substance containing a detectable amount of marijuana, or 60,000 or more marijuana plants, or the if the enterprise received more than $20 million in gross receipts during any 12-month period of its existence.

Steve DeAngelo owner of HarborSide one California’s biggest dispensaries noted this fact in the airing of the episode Weed Wars since his dispensary does more than 20 million dollars a year in cannabis sales. Oddly enough the governments of Colorado and Washington State would similarly qualify for the death sentence along with their heads of department of taxation and revenues.

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Timothy Leary VS the United States of America

Ironically the legality of the taxing cannabis has already been decided by the Supreme Court in Leary Vs. United States.  In this case Mr. Leary who was driving back from Mexico was charged with violating the Marijuana Tax Act after marijuana was found in his car.  After being convicted Mr. Leary appealed his case all the way to the Supreme Court with the argument that paying the tax amounted to self-incrimination since marijuana was declared illegal by the Federal Government. The Supreme Court agreed and in a Unanimous decision overturned his conviction with the following logic.

a.     If read according to its terms, the Marijuana Tax Act compelled petitioner to expose himself to a "real and appreciable" risk of self-incrimination;
b. [The statute] required him, in the course of obtaining an order form, to identify himself not only as a transferee of marijuana but as a transferee who had not registered and paid the occupational tax;
c. Compliance with the transfer tax provisions would have required petitioner unmistakably to identify himself as a member of [a]..."selective" and "suspect" group, we can only decide that when reading according to their terms these provisions created a "real and appreciable" hazard of incrimination.
Interview of Timothy Leary

Attorney Joseph Goldstein does a very nice detailed review of the self-incrimination question that can be found here.

http://www.cardozolawreview.com/content/37-2/GOLDSTEIN.37.2.pdf

 

Some of the highlights in this article include the following.

The U.S. Supreme Court has held that both legal and illegal income is taxable, and this proposition is not seriously in question. Thus, the authority of the federal government, and by implication, the states, to pass these drug tax statutes is valid. However, such statutes must still conform to constitutional guarantees. For purposes of this Note, that means questioning whether such drug tax statutes violate the Self-Incrimination Clause of the Fifth Amendment

Taking all the above into account, the Colorado excise tax statute presents a real and substantial risk of self-incrimination for persons who comply with it.

 

Is there a real and substantial risk of tax-paying marijuana business owners being prosecuted? Well, there certainly is with several dispensary owners being prosecuted at state and federal levels in the past few years. More importantly, some States like Washington use it as a method of intimidation and blackmail. If you don’t pay your taxes we will prosecute you in state court or sick the Feds on you and this certainly has already occurred including happening too  me personally.

Washington State Attorney Steve Graham put it more bluntly.

  The truth is that the dispensaries are scared, and no dispensary is likely willing to refuse to pay these bogus sales taxes to the Department of Revenue. The attorneys general that work with DOR can simply make a call to the criminal division of the Attorney General’s office to push for prosecution of dispensaries unwilling to pay these “taxes.” No dispensary wants to be the one to stand out and risk criminal charges. To put it another way, the uncertainty in the law makes these dispensaries susceptible to a form of blackmail.

http://www.grahamlawyerblog.com/2010/12/24/can-the-department-of-revenue-really-tax-medical-marijuana-dispensaries/

  Moreover, the application of prosecution discretion allows rouge prosecutors to go after any target they choose while allowing others to freely operate. This seems to be a clear violation of Equal Protection clause of the Constitution.  Lance Gloor a medical dispensary owner was recently prosecuted and convicted of growing marijuana in Washington State even though he was paying taxes. In one of the articles written about the case the state accused him of HIDING REVENUE AND NOT PAYING THE FULL AMOUNT. The remarkable thing about this case is there are hundreds of other medical and recreational owners doing the exact same thing he was prosecuted for.  What is to stop prosecutors from going after competition they see as a threat to the illegal tax collecting scheme of a state instituted body?

 

              The threat of crackdown on marijuana tax payers by a new administration.

  The Obama administration has allowed the states to experiment with legalized marijuana but that hasn’t stopped federal prosecutors from selectively targeting growers as in the Kettle Falls Five and other dispensary owners as they see fit. While at the same time allowing others go unmolested. The problem with paying taxes is that you are leaving a paper trail of incriminating evidence for any future prosecutor to use against you. This would be an open and shut case since Federal Courts do not allow the use of a medical marijuana defense. Republican Candidate Chris Christie has made it clear that if he was elected president he would immediately shut down all recreational and medical marijuana operations around the country and probably prosecute many operators. Many are speculating that since he just endorsed Trump after dropping out of the race that he will seek to be appointed Attorney General where he can still carry out his threat of dismantling the entire cannabis industry.



If you are not sure of Christie's intentions consider this statement. Chris Christie calls marijuana users diseased and pledges to cure them with law enforcement.

http://marijuanapolitics.com/chris-christie-calls-marijuana-users-diseased-pledges-to-cure-them-with-law-enforcement/

High Times goes further in the analysis saying that Chris Christie, the man now apparently positioning himself to control the Department of Justice, has been one of legal marijuana’s most vocal opposing forces, saying earlier last year, “As President of the United States, I will enforce the marijuana laws, because I believe marijuana is a gateway drug that causes our children and adults to use other drugs.
Christ Christie on Marijuana Legalization

http://www.hightimes.com/read/attorney-general-chris-christie-could-shut-down-recreational-cannabis-industry.

  One of the precursors of the self-incrimination clause is that there has to be a real and perceived threat of prosecution. Since we have already seen prosecution of taxpaying cannabis owners and the uncertainty of what a new administration would do to existing laws there is no way that taxing the substance can stand up to legal scrutiny until cannabis is legalized on the federal level.

IRS Tax Rule 280E

   To further instill the taxation without representation theory is the draconian IRS tax code 280E which prevents legal cannabis businesses from deducting otherwise ordinary business expenses from gross income coming from distributing a schedule 1 or 2 substance, as defined by the controlled substances act. Cannabis businesses, however, pay taxes on gross income. These businesses effectively pay tax rates that are effectively seventy percent higher than a normal business. In January 2015 the IRS made it even worse by issuing an internal memo that stated how state-legal businesses should calculate federal income taxes. The memo imposed a strict reading on Section 280E. These rules basically stated that not even the minimum deductions would be allowed. These businesses will have trouble staying afloat in the long run. Combined with the Washington States extremely high tax rate many have predicted it will be impossible for any business to make a profit after paying state and federal taxes. What is even more ironic is that the IRS themselves are committing the federal crime of money laundering by accepting the taxes from sales of schedule 1 narcotic along with the Washington State and Colorado department of revenue.

https://www.irs.gov/pub/irs-wd/201504011.pdf

http://www.forbes.com/sites/anthonynitti/2015/01/24/irs-futher-limits-deductions-for-state-legal-marijuana-facilities/#554ab21f6fd1

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Where are the lawyers?

  With the obvious evidence presented and with the Supreme Court ruling of Leary you would think this issue would have been resolved by now in state and federal courts. Why haven’t attorneys’ come rushing to the rescue of prosecuted dispensary owners and medical growers around the country? It would seem to have to do with the all mighty dollar. Attorneys are afraid to go up against the State with fear of being ostracized by the legal community or being shut out of lucrative state contracts in the future. However, 2 attorneys have filed lawsuits relating to taxes in both Washington and Colorado.  Attorney Rob Corry has filed a lawsuit in the Denver District Court to block marijuana taxes in Colorado stating that the tax violates the Fifth Amendment, which protects people from self-incrimination.  A copy of the lawsuit can be found here.

http://archive.9news.com/assetpool/documents/140610024513_Prop-AA-Complaint-Final.pdf

And in Washington State, a lawsuit has been filed by attorney Douglas Hiatt on behalf of his client Martin Nickerson who was prosecuted for running a medical marijuana dispensary while at the same time being issued a tax warrant by the Washington State department o revenue.

See: http://www.king5.com/story/news/local/2015/01/09/medical-marijuana-back-sales-tax/21486299/

These 2 lawsuits were both filed about 2 years ago and the question remains is why are they taking so long to move to a conclusion? Further research on the status of those cases will be updated as soon as I can find out.

 

 Conclusion

   Marijuana is still a schedule 1 narcotic and in spite of promises from the Obama administration operators, caregivers and patients are still being prosecuted on the federal and state level. State Governments are violating the constitutional rights of business owners by collecting taxes that incriminate them for violations of federal trafficking laws. Prosecutors around the country are further violating constitutional rights by selectively prosecuting business owners while leaving others to operate free for doing the exact same thing. It would seem that our constitution was developed to prevent this exact scenario where laws are enforced on certain citizens but not on others. What needs to happen is that states need to return all taxes collected and all records destroyed containing any information on licensing and taxation. This must be done to prevent any administration from using it to prosecute business owners in the future. Any business owner who was prosecuted while paying taxes should immediately have their convictions overturned and be compensated for violations of their constitutional rights and damages to their credit and business reputations.

 

About the Author

D. Meshach is the owner of www.dispensaryexhange.com a searchable dispensary and vendor index for business owners that offer free registration and blogs on the cannabis industry.

Contact at DavidMeshach44@gmail.com

Currently seeking partners and investors for expansion of dispensaryexchange.com

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