Pubdate: Tue, 17 Feb 2015
Source: Denver Post (CO)
Copyright: 2015 The Denver Post Corp
Contact:  http://www.denverpost.com/
Details: http://www.mapinc.org/media/122
Author: David Migoya

IRS REFUSES RESPITE FOR DISPENSARY

Business Penalized for Not Paying Taxes Electronically Has No Bank Option.

A Denver medical marijuana dispensary penalized for not paying 
certain taxes electronically got a succinct reply from the Internal 
Revenue Service during its appeal: Tough luck.

An Internal Revenue Service appeals officer told All greens LLC that 
not being able to get a bank account is no excuse for not paying 
employee withholding taxes electronically, as required by federal tax 
law. The dispensary has tried to get a bank account for at least two years.

That All greens "cannot secure a bank account due to current banking 
laws is not considered reasonable cause to abate the penalty," an IRS 
hearing officer ruled in denying the dispensary's request to waive 
the 10 percent penalty.

The dispensary is one of many to face the fine, assessed even though 
the company pays its taxes in cash and on time at the Denver downtown 
IRS office twice each month.

The IRS requires all businesses to pay the quarterly tax by bank 
wire, which is impossible for hundreds of medical and recreational 
marijuana shops nationwide that are unable to obtain banking services.

Rather than waive the penalty for cash-only businesses paying the tax 
on time, the IRS has advised the companies to avoid the assessment by 
using techniques that amount to money laundering, Allgreens' attorney 
Rachel Gillette has said.

The dispensary was the first to challenge the IRS policy in U. S. Tax 
Court, saying the penalty is unfair since many marijuana businesses 
cannot find banking because the drug remains illegal under federal law.

In newly filed court papers, the dispensary said a hearing officer's 
determination in October that the business' inability to get a bank 
account was little more than hard luck runs afoul of the agency's own rules.

The IRS imposes the penalty "unless it can be shown that such failure 
( to pay electronically) is due to reasonable cause and not due to 
willful neglect."

Allgreens "meets the requirements of reasonable cause because the 
petitioner exercised ordinary business care and prudence in paying 
its federal employment tax obligations," Gillette writes in a new court brief.

"The application of a penalty to an entire industry that, though 
willing, is unable to comply, is discriminatory, unjust and unfair," 
Gillette wrote the IRS.

The IRS was clear that its "position is all ( withholding taxes) are 
to be made via Electric Funds Transfer Deposit System, and as of now 
IRS has not made any policy change or exception for businesses that 
cannot use banks to make their federal tax deposits," IRS settlement 
officer Linda Andrews wrote in her decision denying Allgreens' request.

Gillette said the decision shows how the IRS "has forsaken its role 
as a fair and impartial enforcer of the tax code as it has allowed 
the federal government's position on marijuana to influence its decision."

Enforcing the penalties is "a wasteful and inefficient use of 
taxpayer dollars," Gillette wrote in her Tax Court challenge.

Allgreens' case is pending.
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MAP posted-by: Jay Bergstrom