IRS Tells Pot Shop To Pay $2.5 Million In Taxes, Uses 1982 Tax Code Rule

The Federal government has decided to attack legalized marijuana dispensaries where it will hurt the most, in their pocketbooks. Oakland marijuana dispensary Harborside which calls itself the world’s largest was hit this week with a charge of $2.5 million for back taxes owed from 2007 and 2008.

According to the San Francisco Chronicle that astronomical figure was arrived at when the IRS used a 1982 tax code that relates specifically to businesses that traffic in illegal drugs, which the organization claims the Harborside dispensary does.

Because of the tax code owners of the facility are not allowed to deduct rent, payroll, insurance and other common expenses from their tax forms.

In an amusing attack on the IRS one executive for Harborside notes:

“What kind of drug trafficking organization actually files a tax return?” While they go on to add, “This is not an effort to tax us. We’re happy to pay our taxes. This is an effort to shut us down.”

The dispensary isn’t the first to be faced with such charges however given their size the windfall is the biggest yet. Last year Harborside earned $22 million from 94,000 clients.

The IRS says they plan to audit the facilities 2009 and 2010 tax returns in the near future, in the meantime I have a feeling a lawsuit will soon be filed against the IRS over the “illegal drugs” charge which seems ridiculous since the dispensary operates on a valid license from the state.

Do you think the IRS needs to back off and allow Harborside to operate as a legal business given their legal status in Oakland.

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