Perlmutter, Bennet Push for IRS to Waive Fee that Marijuana Businesses Cannot Avoid

Ed Perlmutter

Rep. Ed Perlmutter (D-Jefferson County)

Whatever your opinion on the legalization of marijuana — both for medicinal and recreational uses — it's become increasingly clear that banking and tax laws need to be adjusted for the safety and security of both businesses and customers.

As David Migoya reports in the Denver Post, Rep. Ed Perlmutter continues his push to find some sort of fair middle ground for pot shops that are being forced to conduct most of their business operations entirely in cash:

U.S. Sen. Michael Bennet and Rep. Ed Perlmutter on Friday asked the Internal Revenue Service to stop assessing a 10 percent penalty on legal marijuana businesses that are forced to pay federal withholding taxes in cash for lack of banking services.

In a joint letter to IRS Commissioner John Koskinen, Bennet and Perlmutter, both Democrats, noted how pot shops in Colorado often have little choice but to pay employee withholding taxes in cash since banks won't take their business.

IRS rules require the taxes to be paid via the Electronic Federal Tax Payment System, and businesses that don't comply face a 10 percent penalty on the tax.

News of the practice came to light when The Denver Post last week reported about a Denver dispensary's legal efforts to challenge the IRS…

…Another problem is that businesses willing to pay the IRS assessment — often amounting to tens of thousands of dollars — can't get an installment plan as other businesses do because they remain out of compliance and subject to additional penalties, according to the attorney who is challenging the fines in U.S. Tax Court. As a result, a legal marijuana shop's operating license is in jeopardy — despite paying their taxes on time — because state law requires them to be in compliance with all federal and state tax laws.

This problem seems particularly ludicrous — again, no matter your opinion on marijuana — because pot shops have absolutely no option for avoiding the 10% penalty they are assessed for not using banking services. The federal government still doesn't allow banks to accept deposits from marijuana businesses, so how, exactly, are they supposed to comply with IRS rules requiring the use of banking services? We're not going to allow you to deposit money in a bank…but we are going to fine you for not having a bank account.

We wouldn't expect Congress to take action on this issue, since Republican House leadership has largely pledged not to take action on, well, anything beyond getting mad at President Obama for trying to govern while they race office chairs up and down the hall. But this is a pretty good issue for potential bipartisan support if there ever was such a thing. Republicans are normally jumping at the chance to prevent the federal government from infringing on state's rights; when you include the opportunity to complain about the IRS at the same time, this should be a slam dunk for the GOP. And again, this is a serious safety issue when you force an industry to carry around massive amounts of cash; why bother robbing a bank when you'll get more cash out of a pot shop that had a good weekend?

If and when federal law is finally changed to accommodate changes created by state elections, Rep. Perlmutter should get the credit he deserves for being at the forefront of a set of issues that really do affect Coloradans of all stripes.

 

9 Community Comments, Facebook Comments

  1. BlueCat says:

    Definitely not fair to make it impossible for them to conduct anything other than a cash only business, then fine them for having no way to pay taxes except in cash. Thanks, Perlmutter and Bennet. 

  2. itlduso says:

    While they're at it, they may want to investigate why the IRS is wasting resources conducting audits of partnerships and S Corps that result in no changes in nearly half the cases.   I've just been through two of them.  Their reasons for selecting these particular returns for examination were based on faulty knowledge of very basic tax law. 

    It's a waste of everyone's time and money.

  3. notaskinnycooknotaskinnycook says:

    Maybe the Senator and the Congressman can team up with their couterparts from Washington State. Their constituents are just bginning to have this same problem. And what of the states that permit medical cannabis?  These bills could end up with a great many co-sponsors.

  4. Tom says:

    How did this not come up as an issue under the medical marijuana system? The only information I can find about dispensary problems with the IRS is a quirk in the tax code that disallows deducting business expenses by "drug dealers". Banking and tax payments weren't issues that I'd heard about until recreational pot businesses started running into problems.

    Since the feds view medical marijuana and recreational sales as equally illegitmate, is this just a case of selectively enforcing the law against a nascent industry before it can spread beyond the first couple of states?

    • DavieDavie says:

      I suspect banks initially had a "see no evil" policy prior to the expansion into recreational marijuana.  With increased attention, they have started closing more client accounts, bringing the issue to a head.

      Time for our ConservaDem President and Attorney General to push the FDIC and IRS to recognize that White market drugs prevent crime and are in the best interest of the nation.

  5. ArvadaProgressive says:

    I'm proud that Ed Perlmutter is representing my district, and I cannot wait to cast another vote for him. Likewise, for Bennet, although he has until 2016. Hickenlooper, Udall, and Zenzinger will have to do.

    • BlueCat says:

      Wish I had Ed but look forward (fingers crossed) to having Andrew. Don't short change Udall. He's been very good on some pretty important issues. I rate him above Bennet, though I'm OK with Bennet, except for wishing for a little more separation from Wall Street. That pretty much goes for almost everybody in congress, most Dems included.  But of course all the Rs are much worse. I think a congressional delegation including both Perlmutter and Romanoff would be a very fine thing.

  6. mamajama55mamajama55 says:

    Cannabis needs to no longer be classified as a Schedule 1 drug. Once it is scheduled down to II, III, or IV, (and that probably won't happen while Michelle "Reefer Madness" Leonhardt is DEA Chief), it will be much easier to make sensible decisions about these matters. FDA is already considering downscheduling cannabis, and then DEA could re-evaluate.

    In the meantime, people who have serious health conditions which can be treated with CBD from hemp (no get-high involved), cannot access these medicines because of the schedule 1 status. This includes my family and friends.

    You should sign my petition on whitehouse.gov . By the way, whitehouse.gov petition site seems to be quite biased against anything to do with marijuana – my petition can only be reached via direct link, not the "issue search". And while I doubt that I am the only genius in the country that had an idea for a downschedule-cannabis-petition, the others are also hidden from view.

    I think that the Obama administration does not want to deal with cannabis law, at least until the FDA and DEA have weighed in.

    But whacko white supremacy petitions and other nonsense are easily viewable. Sigh.

  7. ajb says:

    What part of "This note is legal tender for all debts, public and private" don't they understand?

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