As States Legalize Cannabis, Feds Use a Sneaky Tactic to Continue the Drug War

November 6, 2014   |   Carey Wedler

Carey Wedler
November 6, 2014

(TheAntiMedia) This week, the people of Oregon, Alaska and Washington D.C. voted to legalize cannabis. This is positive news for those who understand the benefits of medical marijuana and the waste, violence, and oppression of the Drug War. But while states across the country are increasingly changing their minds about cannabis prohibition, the Feds have another trick up their sleeves.

Though the drug warriors in Washington are losing the war of public opinion and elections when it comes to legal weed, they still hold the
keys to taxationand using this power, the IRS is making it difficult for marijuana businesses to stay afloat.

The IRS has been relying on the tax provision 280E, established in 1982. Keeping with a decades-old Supreme Court ruling that income from illegal activities is still taxable, 280E establishes that businesses selling a Schedule I or II drugwhich include marijuana, cocaine, and MDMA, to name a fewcannot deduct all of their business expenses. In a show of warped logic, individuals can deduct costs of growing and production (like fertilizer and soil), but not those of sale (such as advertising, rent, and employee salaries).

Denver lawyer and marijuana advocate, Rob Corry, said of this policy:

“If it made sense, I would feel better about following it. I don’t see why production is deductible — they are still producing marijuana!”

As a result of this tactic, numerous new marijuana businesses are unable to deduct many of their costs, making it a challenge to stay in business.

Mitch Woolhiser, owner of Northern Lights Cannabis in Edgewater, Colorado, believes the federal government is actively trying to undermine his business. If he worked in any other industry, he would not have owed taxes last year because he operated at a loss. However, because he sells cannabis, he owed the government $20,000.

The feds appear to be playing a powerful, creative game to make the proliferation of marijuana less pervasive. Taylor West, the deputy director of the National Cannabis Industry Association, says that 70% of her clients’ profits go to the IRS.

“A lot of people think that the marijuana industry is just a license to print money. And it’s just not the case.”

John Cornelius, a Denver accountant who works with marijuana businesses, claims he has worked with clients who have paid upwards of 80%, 90%, and even over 100% of their profits to the IRS. He believes that

“…the feds extend the drug war through 280E. If (the federal government) can’t put them out of business legally when voters are mandating these businesses to move forward, it’s very easy to put them out of business financially.”

The DEA, IRS, and DOJ all declined to comment to USA Today, which published the in-depth story on this topic. Rather, the IRS provided a 2010 letter to the newspaper,  written in response to requests to the IRS from lawmakers in states like Colorado, Arizona, Massachusetts and California. They asked the department to stop enforcing 280E. The letter in response to their request said:

“The result you seek would require the Congress to amend either the Internal Revenue Code or the Controlled Substance Act.”

Multiple members of Congress received the letter from state lawmakers, but little action has been taken.

Regardless of resistance from the federal government, the trend toward legalization and tolerance for non-violent “offenses” is unstoppableas Tuesday’s votes showed. At this point, attempts by the IRS and other branches of D.C. authority to close the floodgates are futile. Though they are making circumstances arduous for many businesses now, such petty attempts to stifle progress are increasingly laughable.

As Woolhiser said of the IRS:

“It’s almost like they want us to fail. Everything I do is aimed at keeping us in business because if I don’t, then (the feds) win. And I’m not going to let them win.”

This article is free and open source. You have permission to republish this article under a Creative Commons license with attribution to the author and TheAntiMedia.org. Follow us on Facebook and Twitter to receive our latest articles. Image credit: O’Dea

Author: Carey Wedler

Carey Wedler joined Anti-Media as an independent journalist in September of 2014. Her topics of interest include the police and warfare states, the Drug War, the relevance of history to current problems and solutions, and positive developments that drive humanity forward. She currently resides in Los Angeles, California, where she was born and raised.

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30 Comments

  1. Here's where the entire IRS "tax code", being illegal, is being used to muck everything up. Income tax was ruled unconstitutional by the Supreme Court in 1980. Now the IRS says "You have to get congress to amend the tax code"… Ha ha ha. It isn't actually legal in the first place.
    That said, when moving to the 10th Amendment, we get into the question of whether or not it is a matter of federal or state law. If it falls under existing federal law, then I believe they can have their way with it, BUT, the states are exercising their 10th amendment rights to legalize the stuff, whereas the feds are still taxing it like it was some kind of interstate activity, or to fall under federal law. Methinks there's war against the feds awaiting under the 10th amendment on this, but no doubt it's all quite positively twisted.

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  2. Even if it's illegal it's still taxable.What a scam. The IRS are live vultures or scum sucking pond fish.

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  3. If you play in their phony world, you are subject to their rules. This is not Law folks, this is their Legal System and statutes created by the Act of 1871, where Jew Federal Reserve Bankers got Congress to commit treason, they turned DC into a Corporation, we all act under it through consent, we consent cause we dont know any better. We live under a fake Constitution, OF the people, suppose to be FOR the people. Our great grandparents were dooped and so on. You are under Contract since your Berth Registration, yes Berth. When you register anything to any Entity, that Entity now owns what ever it was you registered, that was your consent. Why do you think CPS can come to your home and take your kids if they so choose? The state can take your car, your home, anything you Register. Nobody can force you to Contract with them or Register your Private Property. Until you Notice the pricks you are a freeman on the land, using Lawful tactics, WE will never be free.

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  4. They need to open a bakery, then sell a dozen donuts for 120.00 and for 1.00 more you get a qtr ounce. n everything is tax deductible!

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  5. Plus the taxation of the weed would be minimal due to only making a few 100.00 on they sale if it.

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  6. Hhahha… Good one… Think theres laws against this.. Not sure… Need to check w like better business bureau

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  7. That is an expensive quarter!

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  8. Calianne Chambers Depends on where you live and the quality of the product. Where I live that's standard price for top quality buds.

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  9. Here in NY it's as easy to purchase as a gallon of milk. And it's totally illegal. It's cheaper and easier to get if it's illegal. I say DON'T legalize pot. Decriminalization it instead. $120 for a quarter ounce!?!?!? Well I never.

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  10. Maybe they're clearing the field for the big corporations that are chomping at the bit yo take the market. Suppose laws will become more flexible then?!

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  11. Jeff youre getting ripped then… should be like 80-90 a quarter for straight funk bud.

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  12. Maybe jeff is in d.c. Its supposed hi b like 2x more expensive ova there

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  13. Tony Stark I'm in Nashville Tn and it's been 100-120 here for the last 15 years. Everything is inflated around here, especially black market goods. The cops are pretty harsh on all drugs here and that also leads to higher prices due to the risk. Jeff Lachance up there says I'm getting ripped, but I disagree. That's just the market here, and I wouldn't get out any cheaper by driving long distance to get it. The time and gas would make up the difference, not to mention the extra risk. And I'm ok with it so whatever……

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  14. Agreed! Same here in ATX

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  15. Yup dats what I meant not like here in AZ or CA where its way cheaper and yes the "war on drugs" aint helping. I dont use MJ at all, but I still think this should not be a contolled substance in any form and using taxes as hurdles should not be a common practice either.

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  16. Chapeau for those who continue to try their utmost best to stay in business! I call that commitment.

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  17. Heres what I dont understand why dont you just make it a non profit business.. problem solved..

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  18. Same situation in Maryland and we just decriminalized so i think if we build a regulated but accessible medical system to go with it, I that should be perfect…. but they're already talking about recreation even here already while patients still won't have acess to medication until 2015-2016…

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  19. Having said what i said in my prior post, I would vote no on recreational use in MD. Especially as a father but even more so as a former patient under CA Prop.215. Either way, Decriminalize but heavily regulate. Medical programs? Sure but, heavily regulate.
    The worst thing i think we could do to my town and our youth is add about a dozen legal and recreational "pot shops" in addition to the already existing dozens of liquor stores….. (dispensaries, when held to a higher standard could avoid alot of the downside to whats happening in some other states medical communities.

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  20. Or you can buy a quarter from a neighbor for $30 or $40 and a dozen donuts for $5… Better yet you could grow some and sell it to a friend.

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  21. Did you know the IRS is a privately owned corporation.

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  22. Real Legalization @ http://www.Reallegalization.org has the answer! Beginning in Washington state and serving as a template for the states across the nation Real Legalization will bring Real Cannabis Freedom to the People , by the People!
    Remove and Replace the Politcians who Fail to Repeal Bad Cannabis Laws! They do not serve the people! Those politicians serve themselves and their corporate puppeteers!

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  23. "Lets legalize it and then tax it!" Unfortunately, people are not looking critically enough at statements like these. On one hand we regain cognitive liberty through the choice of consumption, but on the other hand one is giving up their economic liberty. These positions are philosophically discordant, but people still somehow manage to say them with a strait face.

    The "legalisation" as we are seeing is no such thing. It only represents a reshuffling of what aspects the government may incur into your life. Only when we see the controlled substances act, and furthermore the modern grounds under which the federal government claims its power to regulate anything it can imagine is connected to interstate commerce, direct or indirect, will we see a proper realignment into a society that does not maintain a disabling cognitive dissonance in terms of what human freedom really is.

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