Weekly Wrapup: Cannabis Dispensary Challenges IRS + California Pot Legalization Efforts on Track

Pay close attention to what’s going on with Harborside Health Center in California, as the battle between the medical marijuana dispensary and the IRS could have repercussions for everyone involved in the cannabis industry.

As we reported last week, the Oakland-based dispensary has formally protested a $2.4 million tax bill it received from the Internal Revenue Service. Government tax officials determined that Harborside cannot deduct common expenses – such  as electric bills – because its business revolves around a drug that is illegal federally. As a result, Harborside now has to pay back taxes from previous years in which it claimed the deductions

Why is this important to you? If the IRS decision holds, it essentially means that most businesses in the medical marijuana
industry – from dispensaries to growers – will not be allowed to claim standard business deductions. The bottom line: You’ll
pay more in taxes than other businesses, in some cases much more. Most companies in any industry would struggle to survive if they couldn’t claim standard deductions, and the same is true in medical cannabis. Harborside has even said that, should the
IRS ruling stand, the dispensary might not make it in the long run.

The IRS has a few more weeks to respond to Harborside’s complaint. It could theoretically reconsider its decision, but don’t
hold your breath. The government, after all, made its initial determination after a lot of thought, considering the IRS audit of Harborside lasted a year and a half.

California was also at the center of another top MMJ news story last week. A new poll found that 62% of likely voters in the state back a proposal to allow adults to use cannabis for any reason. If support is indeed that strong, the proposal – called the
Regulate Marijuana Like Wine Act of 2012 – stands a real chance of getting on the ballot and passing. Similar efforts in Colorado and Washington State are gaining momentum as well.

The next big question: What happens if a state actually does approve the general use of marijuana? It’s tough to
say, but it would certainly intensify the battle between states and the federal government on the issue of cannabis.

Medical Marijuana Business Daily’s other top stories from last week:
Company plans dispensary acquisition spree in Colorado
Symposium unites DC pot industry
New book explores secrets of successful MMCs
Guest column: 5 people to watch in in 2012