Pubdate: Sat, 12 Jul 2014
Source: Denver Post (CO)
Copyright: 2014 The Denver Post Corp
Contact:  http://www.denverpost.com/
Details: http://www.mapinc.org/media/122
Author: David Migoya
Page: 13A

BENNET, PERLMUTTER ASK IRS TO WAIVE FINES FOR POT SHOPS

Businesses Hit for Cash Payment of Taxes Have Little Choice, They
Say

U.S. Sen. Michael Bennet and Rep. Ed Perlmutter on Friday asked the
Internal Revenue Service to stop assessing a 10 percent penalty on
legal marijuana businesses that are forced to pay federal withholding
taxes in cash for lack of banking services.

In a joint letter to IRS Commissioner John Koskinen, Bennet and
Perlmutter, both Democrats, noted that pot shops in Colorado often
have little choice but to pay employee withholding taxes in cash
because banks won't take their business.

IRS rules require the taxes to be paid via the Electronic Federal Tax
Payment System. Businesses that don't comply face a 10 percent penalty.

News of the practice came to light last week, when The Denver Post
reported about a Denver dispensary's legal efforts to challenge the
IRS.

"Given these current challenges, we request the IRS waive this
10-percent penalty for marijuana businesses at least on a temporary
basis until there is greater clarity whether (they) have sufficient
access to the banking system to meet their obligations" to pay via the
electronic system, the two wrote.

Another problem is that businesses willing to pay the penalties -
often tens of thousands of dollars-can't get an installment plan as
other businesses do because they remain out of compliance with payment
rules and thus are subject to additional penalties, according to the
attorney who is challenging the fines in U.S. Tax Court.

As a result, a legal marijuana shop's operating license is in
jeopardy-despite paying its taxes on time - because Colorado law
requires them to be in compliance with all federal and state tax laws.

"It's an issue that continues to snowball," said Rachel Gillette of
Lafayette, who is representing Allgreens LLC of Denver. The medical
marijuana dispensary is challenging more than $20,000 of penalties
assessed from December 2012 through December 2013 for paying its taxes
in cash.

The company had a bank account at one time and paid the taxes
electronically, but the account was closed and the business has been
unable to establish a new one. Banks remain leery because marijuana is
illegal under federal law.

"The IRS needs to come up with a fix that works for them," Bennet told
The Post."Until then, it should drop the penalties."

The government in February offered guidance for how banks could work
with cannabis businesses that are legal under state law- 23 states and
the District of Columbia have legalized medical marijuana while only
Colorado and Washington have approved its sale for recreational use-
but it was too vague for banks.

"It is still not clear ... whether the guidance provides the necessary
certainty to Colorado based financial institutions interested in
serving marijuana businesses," Perlmutter and Bennet wrote.

The IRS did not immediately offer any comment about the
letter.

"I hope the IRS waives this penalty for marijuana businesses as we
work on a broader solution to reduce public safety risks and provide
greater clarity for these businesses," Perlmutter told The Post.
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MAP posted-by: Matt