IRS Hits Oakland Pot Shop With $2.4M Tax Bill

My Fox New York ^ | uesday, 04 Oct 2011, 8:30 PM EDT | Ap

[Smogger]

SAN FRANCISCO (AP) - The federal government has found a new weapon in its war on marijuana — the tax man.

A San Francisco Bay area medical marijuana dispensary that promotes itself as the world's largest has been hit with a $2.4 million tax bill following an audit by the Internal Revenue Service, the dispensary founder said Tuesday.

The back taxes, penalties and interest levied against Harborside Health Center came after the IRS examined its returns for 2007 and 2008 and determined a 1982 tax code prohibiting cost deductions for businesses that traffic in illegal drugs applies to the dispensary.

Harborside is a spa-like fixture on Oakland's waterfront with 94,114 registered customers and 84 full-time employees that offers an average of 30 varieties of medical marijuana every day and has $22 million in annual sales.

"What kind of drug trafficking organization actually files a tax return? None of them do," said Harborside CEO Steve DeAngelo, who gave his auditor a personal tour of his posh apothecary. "The very fact that we filed a tax return and told the IRS all the details of what we are doing proves we are not a drug trafficking organization."

The IRS said the agency does not comment on individual audits.

[bcsco]

His business is going to pot...

[Hildy]

It’s hard to know who to root for in this story.

[Red Badger]

They got Al Capone, so you ain’t gotta prayer, dudes..................

[Tublecane]

I’ve never understood, aside from greed, why SCOTUS said it was okay to tax income from illegal activities. Doesn’t make sense, does it?

[Michael.SF.]

has 22 million in annual sales

Sonny was right:

There's a lot a money in that White Powder Green stuff

[org.whodat]

Mans business has gone up in smoke. LOL

[Blood of Tyrants]

Pot ought to be decriminalized to take away the power of the federal government.

[freedomlover]

What a buzzkill

[Michael.SF.]

why SCOTUS said it was okay to tax income from illegal activities. Doesn’t make sense, does it?

Al Capone is the perfect example of why this makes sense. You can't prove the crime, but the crooks can still do time.

"not guilty" does not always mean innocent.

[DBrow]

And this is just income tax.

The Marijuana Tax Stamp Act or whatever it is called levied a $200 tax on each ounce sold, that was the original cannabis prohibition bill. I bet as soon as this income issue gets cleared, someone will be there asking for the tariff fees.

[Tublecane]

“Al Capone is the perfect example of why this makes sense. You can’t prove the crime, but the crooks can still do time.”

That’s a different way of making sense.

[Gaffer]

How can the government tax an illegal substance? Just say it's the income and not the means? I guess it worked for Capone, though.

[Ratman83]

Lets see 1982 tax code for 2007 & 2008 taxes, hope it is still in effect and has not been repealed by the thousands of changes since then. Boy if the IRS streching things.

[Lurking Libertarian]

I’ve never understood, aside from greed, why SCOTUS said it was okay to tax income from illegal activities. Doesn’t make sense, does it?

The 16th Amendment says that Congress can tax income "from whatever source derived." That language certainly encompasses illegal sources. And it hardly seems fair for criminals to be treated more favorably than honest folks.

[fr_freak]

It’s hard to know who to root for in this story.

Well, let's see if we can work through this together:

On the one side, you have a group of people, who, regardless of how unsavory they may be, are engaging in a form of commerce that is highly regulated, but perfectly legal under the right conditions in the state of California.

On the other hand, you have federal bureaucrats whose character with regards to proper respect for the US Constitution is decidedly unsavory, who are using the Big Brother-esque IRS to intimidate, harass, and possibly steal from the people above, using a method that could easily be turned on any man, woman or child in this country, at any time, for any reason.

I would think the choice would be clear to any freedom-loving "conservative".

Let me put this another way: if the federal government thinks that it is entitled to outlaw intra-state pot use and growing (which it has), then why don't the feds simply mount up and arrest every single person in every dispensary in California and other states? Why sic the IRS on them? I'll tell you why - because they know they'd never get away with it. They are on shaky ground with regulating personal behavior as it is, and mounting such law enforcement operations in violation of the state's laws would be a direct challenge to California's sovereign authority under the Constitution, prompting a crisis that could very well lead to another FULL civil war. So, they take the back door route, the one that most slave-minded Americans will bend over and accept without question: they sic the almighty, all-powerful, you-dare-not-question-them IRS on these guys as a final means of intimidation and show of authoritarianism.

If your choice still isn't clear, I think you need to re-evaluate which side you're really on.

[RexBeach]

I think this bazoo may have been smoking too much of his own product.

“Don’t Bogart that joint, my friend, pass it over to me...”

Very, very heavy story, man.

Now, where are the doobies?

[Razzz42]

The IRS just wants their cut of the action, they don’t care if they get paid from blood money or drug money.

[Lurker]

Damned well said. Thanks.

[tacticalogic]

The Marijuana Tax Stamp Act or whatever it is called levied a $200 tax on each ounce sold, that was the original cannabis prohibition bill. I bet as soon as this income issue gets cleared, someone will be there asking for the tariff fees.

From what I've read about it, the cost of the stamp was relatively modest. You just couldn't buy the stamps. To buy the stamps, you had to bring the hemp in to have it weighed. When you did, instead of selling you the stamps they busted you for posession of hemp without the proper stamps.