Paying sales taxes on medical marijuana? Washington Department of Revenue says it’s a must. (Photo: Getty Images)
Medical marijuana businesses or “collectives” that haven’t been paying the state sales tax — about 145 in King County alone, roughly half of the number of businesses here — will be getting letters from the Washington Department of Revenue instructing them to pay up.
The letters will go out on Friday, the DOR said in a news release. It’s not the first time DOR has gone after sales tax from medical marijuana collectives, processors and store fronts, but this round of collection notices comes as the future of medical pot sales grows increasingly uncertain.
Federal law enforcement and political leaders in Washington made it clear after the Department of Justice said it would not sue to stop the creation of a recreational marijuana market that the “unregulated” medical market must be closed down or brought under tight regulation.
And, in its recommendations to the Legislature, the Liquor Control Board advises shutting down collective gardens, the backbone of the current medical marijuana market.
As we wrote in our story about those recommendations:
Collective gardens allow several patients to grow plants that can be harvested for themselves and others who are members of the collective but not themselves growers. The growers then can be reimbursed for their expenses, thus creating the current controversial “store fronts” that sell marijuana to patients with medical cards for “contributions.”
The taxable status of those contributions have been an ongoing point of confusion, but not for the DOR.
“We’re going to take a case-by-case approach with any business that contacts us and owes back taxes. Each business has a different set of circumstances, and we will work with them to the best of our ability,” DOR spokeswoman Kim Schmanke said in an email exchange. “Our experience shows us that most businesses want to comply with their tax responsibilities and just need to know what’s expected. If we continue to have businesses that hesitate in responding by Jan. 24, we’ll cross that bridge when we get there.”
Here’s the DOR’s news release:
Medical marijuana taxes focus of Revenue outreach
OLYMPIA – Dec. 31, 2013 – Confusion over the taxability of medical marijuana is leading the Washington State Department of Revenue (Revenue) to start an education effort early in the new year.
Revenue is mailing letters to several hundred businesses and organizations that provide medical marijuana, “medibles,” and related products, explaining that taxes apply to their transactions. Letter recipients include dispensaries, collectives, cooperatives, nonprofits and businesses that should be – but are not – registered with Revenue or paying taxes.
The letters will be mailed Friday, Jan. 3, 2014. Businesses should comply by Jan. 24, 2014.
Revenue has become increasingly aware of confusion within the medical marijuana community about the responsibility to collect and pay taxes. This education effort aims to create a level playing field by increasing compliance from those who are not registered and filing with Revenue.
Revenue often sends letters to educate taxpayers on their tax responsibilities, particularly when the agency sees common filing errors or underreporting.
Some of the taxpayers Revenue contacts in January may owe back taxes for prior periods.
Revenue has provided tax guidance to the medical marijuana community in recent years, including a 2011 special notice about the taxes collected on the sale of medical cannabis.
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