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For pot stores evading taxes, any rationale will do

Post by TNT Editorial Board / The News Tribune on Aug. 22, 2012 at 5:45 pm |
August 22, 2012 5:09 pm

Marijuana plant

This editorial will appear in Thursday’s print edition.

As if the world of medical marijuana weren’t confusing enough, now comes news that some dispensaries are faithfully paying sales taxes while others consider it strictly optional.

The ones that don’t pay offer a variety of reasons – none convincing and all self-serving.

They portray themselves as legitimate businesses yet argue that their product shouldn’t be taxed – because it’s illegal. Try to parse that logic.

One pretext is that marijuana is exempted from taxation because it’s a prescription drug. But under state law, marijuana is explicitly not a prescription drug. As medical marijuana people usually take pains to point out, the “green card” authorizations that some naturopaths, nurse-practitioners and doctors hand out like confetti are not prescriptions.

Yet another pretext is that customers aren’t really paying for marijuana; they’re merely making a “donation” to the provider to offset costs. This reflects the blend of magical thinking and greed unique to this illicit industry.

In the nonstoned world, when someone walks into a store with money, leaves some of the money there, then walks out with the store’s goods, it’s called a “sale.” Of course the money offsets costs; that’s how the business stays in business. It’s still a sale.

Donations are voluntary – the word means “gift.” You don’t have to give one to get the goods. Ask a medical marijuana user if he’ll keep getting the pot if he stops making “donations.”

We’re not necessarily endorsing Initiative 502, but the ballot measure would at least be up front about the selling, taxing and using. It would authorize marijuana sales at state-licensed stores without the humanitarian pretensions – and the taxes would be built into the price.

Proponents say those taxes would raise nearly $2 billion in revenue for the state over five years. But there’s a big “if”: That will only happen if the federal government agrees to look the other way.

Dispensary owners who aren’t paying state sales tax may be playing fast and loose with their federal income taxes, too. Under federal law, their business expenses aren’t deductible because their businesses are illegal. However, in one of those charming quirks of the law, they are still required to declare income even if it is obtained illegally.

Anyone who doubts that should look up the history of America’s Prohibition era. The federal government jailed mob leader Al Capone for tax evasion because he didn’t declare the profits he’d made on the illegal sale of bootleg booze. Purveyors of medical marijuana should take Big Al’s fate to heart.

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