Skip to comments.Marijuana is illegal under federal law, should IRS be able to collect taxes on Colorado pot sales?
Posted on 07/05/2014 5:43:33 PM PDT by Libloather
(CNN) Some Colorado marijuana sellers are challenging Uncle Sam. Theyre filing a lawsuit saying the IRS shouldnt be allowed to collect taxes on marijuana sales because marijuana is illegal under federal law.
Attorney Rob Corry says forcing Colorados recreational marijuana businesses to pay violates the United States Constitution.
He has filed a lawsuit in District Court on behalf of clients, some of whom say taxes could be used as evidence in any future prosecution.
Theyre open records and they are admitting to a federal crime. Its still a federal crime to sell marijuana, Corry said.
(Excerpt) Read more at fox6now.com ...
Seems to me that taxation was one of the main selling points of the pro legalization crowd.
I believe you have to declare income on unlawful activities.
if its income you must declare it, illegal or legal. How do you think they put Al C. in jail.
“”if its income you must declare it, illegal or legal. How do you think they put Al C. in jail.””
I was thinking of Al Capone, too.
Even with the Just-Us department's "operation choke point" which targeted "shady" but legal industries, like porn, firearms, and payday loans, Holder ordered his minions NOT to go after the dispensaries, so they could use banks for their funds.
Yet another example of a completely lawless regime.
extortion and robbery are also illegal, but the government still expects taxes to be paid on income from them.
That’s how they got Al Capone - tax evasion.
No, but under current law they could get the shop owners under RICO laws (I think), however with the selective enforcement this isn’t likely.
So how did they get Capone?
Huh? Since when does the law matter to THIS Federal government??
Gotta love the Federal courts. States pass laws contrary to existing Federal drug laws and there is no problem. Let a state try to pass a law that protects even a viable fetus and that law is voided by those ever diligent judges before the ink dries.
“Income” is from whatever source derived
the sellers and attorney must be smoking something or maybe it’s the 39% federal tax rate they don’t like
Heck, the president breaks the law everyday, he still files his taxes, why should his base be any different?
It is fraud not to declare income. It doesn’t matter if its from prostitution, drugs, bank robbery, fraud, bribery, or grifting, it is illegal not to declare it.
So yes, if you are going to sell something illegal that makes people unmotivated, mentally confused, more liable to depression and schizophrenia, and lung cancer, the sellers should pay taxes.
If you declared bankruptcy the IRS will tax you on the money you owed and couldn’t pay saying it’s a monetary gain.
You are required to report ALL income, legal or illegal. That is how they got Dillinger.
I mean Capone.
Not federal taxation.
IIRC, they brought illegal income under the taxation umbrella as a way to catch gangsters in the Capone era. If they couldn’t catch them for the actual crimes, they could get them on tax evasion.
That's how the got Capone. They got Dillinger with a hail of lead.
Didn’t they finally get Capone for not paying taxes on his illegal earnings?
What a shame to see those dope dealers and pushers jailed for tax evasion. LOL
I expect an Executive Order any day making it legal all around the world!!
I was thinking the Supremes would just call it a “penalty” and move on...
“I believe you have to declare income on unlawful activities.”
Al Capone could confirm this.
“They got Dillinger with a hail of lead.”
Most people don’t know that the Feds managed to waste a couple of innocent bystanders with that little operation.
Likewise for various state and local politicians on the take. The Feds got them for not paying income tax on the bribes and kickbacks.
No profits would mean no taxes on profits.
But then, what would be the incentive to stay in business?
Are you familiar with the Kansas City Union Station Massacre?
I think the final body count was five -- four LEOs and the one criminal who was already in custody. All by "friendly fire". The three perps unleashed a hail of lead, but hit nary a thing -- except the façade of the train station (the bulletmarks are still there).
Fascinating case, trying to sort thru what really happened.
First, as referenced in related threads, please consider the following.
In a nutshell, the regardless what FDR's Constitutution-ignoring activist justices wanted everbody to think about the scope of Congress's Commerce Clause powers in Wickard v. Filburn, the Supreme Court had arleady historically clarified the following about the federal government's constitutionally limited powers:
The states have not only never delegated to Congress, expressly via the Constitution, the specific power to regulate intrastate commerce, but the Court has also used the example of agricultural production, which is what marijuana is, as an example of intrastate commerce that is off limits to Congress.
The Court has also clarifed that Congress has no power to lay taxes if such taxes cannot be justifed under its constitutional Article I, Section 8-limited powers, intrastate agricultural production not one of those powers.
Regardless that federal lawmakers will argue the idea that if the Constitution doesn't say that they can't do something then they can do it, the Court has also clarified just the opposite, that powers not expressly delegated to the feds via the Constitution are prohibited to the feds.
Note that all the statements above are substantiated below by excerpts from Supreme Court case opinions. Also note that the last excerpt includes the statement about intrastate agriculture as well as powers prohibited to the feds.
State inspection laws, health laws, and laws for regulating the internal commerce of a State, and those which respect turnpike roads, ferries, &c. are not within the power granted to Congress [emphases added]. Gibbons v. Ogden, 1824.
Congress is not empowered to tax for those purposes which are within the exclusive province of the States. Justice John Marshall, Gibbons v. Ogden, 1824.
From the accepted doctrine that the United States is a government of delegated powers, it follows that those not expressly granted, or reasonably to be implied from such as are conferred, are reserved to the states, or to the people. To forestall any suggestion to the contrary, the Tenth Amendment was adopted. The same proposition, otherwise stated, is that powers not granted are prohibited. None to regulate agricultural production is given, and therefore legislation by Congress for that purpose is forbidden [emphasis added]. United States v. Butler, 1936.r
As a side note concerning the federal government's constitutionally limited powers, please consider the folloiwng. The states would sure be a dull, boring place to grow up and live in if parents were to make sure that their children were taught about the federal government's constitutionally limited powers. /sarc
The IRS has been sending tax bills to marijuana traffickers for years and years-legality of the substance is irrelevant.
That is how the feds busted Al Capone.
For not paying taxes on his ill gotten gains he was sent to prison for tax evasion.
I hope they win, as this could further the push to repeal Amendment 64, which legalized and started this whole mess.
Obviously they never studied how mobsters are charged. The mob has a whole series of front organizations these days to launder their money so they don't get convicted on the tax avoidance charges.
I didn’t know there was a federal sales tax (headline suggests)
The IRS don’t care about legality. They want their cash.
I think they know that this is how they got Capone. The point here is, and the problem which has been pointed out many times by people of all political stripes is that filing a tax return declaring illegal income is a violation of the 5th amendment right against self incrimination. They say they made $1MM selling pot, pay $390,000 in taxes on it, and then 5 years later the feds could throw them in jail and have their own self-sworn and signed “admission” as evidence against them in trial.
I am sure that this fine point has also been adjudicated... but maybe if we are lucky we can get them to amend the tax form so that nothing written on it can be used to incriminate the filer for anything (or at least for anything other than tax evasion). Not posting this to say I agree with the tax scheme, just that this is the way it is.
Maybe not, but they’ll sure tax the profits as revenue.
Good luck. From the instructions for Form 1040:
“Illegal activities. Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Form 1040, line 21...”
Wikipedia is your friend.
Seriously, I thought that literally everybody had seen that episode of "The Untouchables," with Robert Stack as Eliot Ness.
Excuse me, but I thought that this article was about marijuana... not tobacco.*
*Oh, right: For some reason, tobacco isn't illegal. And yes, I am aware that virtually everything you eat, smoke, drink, or do probably will increase your statistical chance of getting cancer, developing bad breath, or becoming a Democrat... I just don't think that that justifies Father State sticking his nose into my personal affairs.
"Fortunately, it turned out that they were drug dealers."
-Frank Drebin, "Police Squad"
Like being a highly-paid, do-nothing member of the Board of Directives of a non-profit offers no incentives!
Just ask Chelsea Clinton!
Though if they can also intimidate, injure, slander, or otherwise harrass their political opponents - why, then that's just the icing on the cake!
And further: "You must enter the place where the body of your murder victim was dumped on line 21a... [Note: You hereby waive your rights under the Fifth Amendment.]"
Seriously: Does that mean that I can also deduct legitimate business expenses, like the cost of icepicks, bullets, gunney sacks, rope, cement, etc.? Will the IRS accept a receipt for breaking a deadbeat's legs signed "Vinny?"
Yep - by the States that legalize it. Kind of ironic that the Feds, who thought they were being cute by not stopping the States from asserting their rights, might end up with egg on their faces over this. Whether one thinks it ought to be legal or not, I like the fact that States are making small inroads by telling the Feds to re-read the 10th...