Sacramento Marijuana Dispensary Battles IRS Over Business Deductions

Sacramento Bee:  “Sacramento’s Canna Care dispensary, an evangelical medical marijuana provider renowned for doling out buds with Bibles, is waging a public fight with the Internal Revenue Service over an $873,167 tax penalty sought under a tax code aimed at illegal drug traffickers.  On Feb. 24, the U.S. Tax Court in San Francisco is due to hear Canna Care’s challenge over whether the IRS can impose the hefty tax demand under a 1982 law intended to close a loophole that allowed a Minneapolis cocaine and methamphetamine dealer to claim tax deductions for a scale, his apartment rent and telephone expenses.  In the case of Canna Care, the IRS has refused to accept $2.6 million in business deductions for employee salaries, rent and other costs after auditing 2006, 2007 and 2008 federal tax returns for the north Sacramento dispensary. However, the IRS did allow the dispensary, which handles about $2 million in medical marijuana transactions a year, to deduct the costs of the marijuana itself.”