Marijuana holds a unique place in the legal system. On one hand, many states, including Florida, have legalized marijuana for medical use. Some states have even legalized marijuana for recreational use. Despite this, marijuana remains a federally controlled substance and is illegal under federal law. Through a series of federal legislation and executive orders, however, people and businesses complying with their state’s marijuana laws have little to fear from the federal government when it comes to the possession, use, and sale of marijuana.
One notable exception to this rule is taxes, as the Tenth Circuit Court of Appeals recently made clear. In 2017, the IRS began auditing Standing Akimbo, a Colorado medical marijuana dispensary. During this audit, Standing Akimbo refused to produce certain documents, which led to a lawsuit filed by the IRS. While the majority of the case revolves around Colorado record laws and the Fourth Amendment, there was one key holding every dispensary across the County should be aware of. In its opinion, the Court made clear that marijuana was still an illegal, controlled substance pursuant to federal law and, as such, deducting business expenses related to the sale of marijuana is an “unlawful activity.” The Court explained that “despite legally operating under Colorado law, the Taxpayers are subject to greater federal tax liability because of their federally unlawful activities, and any remedy [for this] must come from Congressional change to § 280E or 21 U.S.C. § 812(c) (Schedule I) rather than from the courts.” Standing Akimbo, LLC v. United States, 19-1049, 2020 WL 1684056, at *7 (10th Cir. Apr. 7, 2020).
As the “legal” use and sale of marijuana in Florida continues to grow, dispensaries need to clearly understand their rights and how federal and state laws intersect. If you operate a medical marijuana dispensary in Florida and have questions about your rights, you should contact an attorney at Smith & Associates for a free initial consultation.