Business, Politics

Cannabis is Federally Illegal But the IRS Will Still Collect Cannabis Taxes

December 3, 2020 11:30 am ET Estimated Read Time: 5 Minutes
Cannabis is Federally Illegal But the IRS Will Still Collect Cannabis Taxes

Cannabis and the IRS are two words that when used in the same sentence that can lead to anxiety, headaches, depression, and more. If you work in the cannabis industry, you probably know that most interactions you have with the IRS will lead to you needing medical cannabis attention. The IRS and cannabis is a very touchy subject.

The Internal Revenue Service is operated by the federal government. Cannabis businesses are not allowed to advertise like traditional businesses using billboards, television, and other conventional means of marketing and advertising. They are restricted in many other ways as well too. Just like any other legal business, though, cannabis businesses are still required to pay a federal tax. This is where the issues start to arise. How can the federal government say that cannabis is against the law and deem it federally illegal yet still collect taxes on it from state-legal markets?

Cannabis businesses also are one of the heaviest taxed sectors in the United States of America. You would think substances with a proven track record of death, addiction, sickness, and harm such as alcohol, tobacco, or pharmaceuticals would fall under a heavy tax, yet that are marketed and sold at cheap prices around every corner. Cannabis has many different medical applications. The agricultural aspects of this widely misunderstood plant are immense as well. There is also a huge industrial and commercial market for cannabis. In short, the plant has many different ways of benefiting society and the planet. The one thing that seems to be standing in the way of this is the United States federal government and a few handfuls of draconian elected officials still supporting outdated views of prohibition and reefer madness from yesteryear.

Cannabis Taxes and the IRS

When it comes time to pay your taxes as a cannabis business, you better get ready to have a lot of cash on hand. In true style representing that of something out of an Italian mobster movie, men in suits will show up at your door to collect your cash-only payment to the U.S. government. Many people believe since the United States federal government still supports cannabis prohibition, they should not have any right to collect federal taxes. It would seem that this could be argued in a court of law, and most likely, it will have to be done that way for this issue to ever be resolved.

Beyond the IRS coming in yearly with their muscle to swoop up your hard-earned cash at a rate higher than any other legal business in America, they also believe they have the right to investigate you as a cannabis business.

IRS Investigates Cannabis Companies and CO Court Allows It

Currently, a few companies in Colorado are going through issues with the IRS. The Internal Revenue Service has been investigating companies like The Green Solution that is based out of Denver, Colorado. This company has been going through an IRS audit since the 2013/14 tax year ended. Companies being investigated by the IRS are claiming this government agency is misusing its authority in an effort to collect information about consumers to share with the feds. With the feds having the view they do towards cannabis, I say they should stay away, and the State of Colorado should enforce the protection of laws they passed. We all knew this was going to be an issue so let’s get it out in the open. Here is what the feds had to say about some cannabis businesses in Colorado.

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“There is nothing to uncover. Petitioners sell marijuana to the public. Medicinal Wellness Center promotes itself as ‘a full-service marijuana superstore’ [and] Medicinal Oasis claims to have the ‘largest selection of cannabis in the world!’ If the federal government someday elected to pursue prosecution of petitioners under the Controlled Substances Act, a visit to their websites, stores, or superstores (as the case may be) would almost certainly provide an ample basis to begin an investigation.”

What About the Fourth Amendment?

Do you think the IRS has the right to go over a business’s records and obtain information about you? Judge Gregory A. Phillips does. He said that “Because the Taxpayers have no Fourth Amendment right at stake, the IRS need not obtain a warrant supported by probable cause to get the records.” For those of us not fluent in our Amendments, the Fourth Amendment of the U.S. Constitution states that,

“[t]he right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”

What a mess. Do you trust the government with this? Do you trust them with your personal information when it’s pretty evident that they can’t even keep up with their own? Do you think the IRS should have the right to investigate cannabis businesses while cannabis remains against the law at a federal level?

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