Dispensary Tells IRS to Take Its Cash and Smoke It 1

Despite my personal “no” vote on Colorado legalizing marijuana (I was sick of the “Mile High” and “Rocky Mountain High” jokes even before it passed), it’s been entertaining to watch the marijuana tax ramifications running wild. The latest lawsuit comes from Allgreens LLC, which says its unfairly assessed a 10 percent penalty for paying their quarterly IRS tax bill in cash.

It goes something like this: The IRS doesn’t want the hassle (and likely liability) or dealing with cash. So they require companies to wire in the estimated payments. To incentivize the use of the system, they beat down non-compliant taxpayers with a 10% penalty if they pay in cash instead.

Well, what do you do if you’re a marijuana dispensary that can’t secure a bank account because the banks don’t want to handle skunky smelling cash money obtained illegally by Federal law?

Growing money

Good try, Mr. Stock Photographer, but that’s the wrong plant if you want to try and bribe the IRS

To quote Allgreens’ lawyer:

“It was not that the taxpayer ‘did not want’ to make use of the EFTP System,” Allgreens’ attorney Rachel Gillette wrote in the Tax Court petition. “Rather, the taxpayer is unable to secure a bank account due to the nature of its business. With no bank account and no access to banking services, the taxpayer is simply incapable of making (the payments electronically).”

The IRS initially waved the concern off, suggesting that the company funnel money through a third party to have them make the payment on their behalf. You could even say they were telling them to conceal the origins of their (federally) illegally obtained money by means of a legitimate business, which, coincidentally, is the very definition Google gives to money laundering.

Is it still considered entrapment if an IRS agent induces you to commit a criminal offense?

Anyway, just another example that the legality of marijuana is far from settled even after passing it through the ballot box. If anything is ever firmly decided, I’ll let you know if Allgreens name applies to its tax payment along with its medicinal product.


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Image by Aaron Patterson