March 13, 2011

Surprise! The IRS won't let you deduct business expenses for your drug trafficking enterprise.

Even if the voters in your state approve of medical marijuana and you're running a "dispensary" for people who have doctors' permission slips to use what is banned under federal law. And thus the federal government has figured out how to crush the dispensary business.

36 comments:

The Crack Emcee said...

Well that makes sense because DEMOCRACY SUCKS!

Julius said...

Civil disobedience in this case is entirely justified. It also has the side benefit of making a stand for Federalism.

These people want to pay their taxes, after all, but the government won't make that possible.

Two sets of books is probably the easiest solution.

I'm sure that customers would prefer to be able to only pay in cash rather than have their favorite dispensary shut down.

SGT Ted said...

california law never did allow the operation of dispenseries. The idea was for the patient or someone close to him would grow it. No money was to change hands.

edutcher said...

Julius said...

Two sets of books is probably the easiest solution.

That's what Big Al thought.

Don't be surprised if somebody with the initials IRS pays you a call.

GreggoryJ said...

Wow man that's a real buzz kill.

shoutingthomas said...

Wow man that's a real buzz kill.

I think the appropriate phrase is:

Dude, don't harsh my mellow.

Isn't this Obama's IRS? What the hell is going on? I thought Obama toked up when he was younger.

Hank Rearden_WI said...

California, AGAIN, out of touch with reality, and the law, who'd have guessed.

CachorroQuente said...

This is too funny though I agree it is unfair in every respect to tax cash flow as if it were income.

Perhaps rather than engaging in tax fraud/evasion and risking long-term incarceration (in the name of civil disobedience, oh my) it would be possible to structure the business as some sort of consignment operation rather than as a retail operation.

ironrailsironweights said...

Two doctors are in a hospital hallway complaining about Nurse Jenny. "She's completely dyslexic. She does everything absolutely backwards," says one doctor. "Just last week, I told her to give a patient 2 milligrams of Percocet every 10 hours. She gave him 10 milligrams every 2 hours. He nearly died on us!"

The second doctor says, "That's nothing. Earlier this week, I told her to give a patient an enema every 24 hours. She tried to give him 24 enemas in one hour! The guy nearly exploded!"

Suddenly, they hear this blood-curdling scream from down the hall. "Oh my God!" says the first doctor, "I just realized I told Nurse Jenny to prick Mr. Smith's boil!"

Peter

Ut said...

"And thus the federal government has figured out how to crush the dispensary business."

You're so cute, Ann. How incredibly naive this comment is.

The federal government doesn't want to "crush" the dispensary business.

It's just that the federal government wants a larger CUT of the dispensary business. The federal government just became the silent partner of every dispensary business.

And they wants they money.

Notice, the IRS didn't say you can't file a drug return. You can file a drug return. You can report your drug income. And you can pay your taxes with drug-tainted 20-dollar bills.

You just can't deduct any expenses. And so your "profit" is naturally going to be very high. Since the federal government only taxes the profit - this ensures their cut is the highest possible.

Voila!

The federal government is a protection racket, Ann and the IRS is its enforcer. You should know better.

Ut said...

Here is the proper interpretation of this post.

Normal business tax return (hugely simplified):

Income: $100,000
Actual Expenses: $50,000
Deductible Expenses: $50,000
Profit: $50,000
Tax Rate: 35%
Tax on Profit: $17,500

Drug business tax return (hugely simplified):

Income: $100,000
Actual Expense: $50,000
Deductible Expenses: $0
Profit: $100,000
Tax Rate: 35%
Tax on Profit: $35,000

The effect of the IRS decision isn't to destroy a dispensary. The effect is to double that businesses tax rate by not allowing usual business expenses to be deducted from its income.

The drug business can still be highly profitable ... just not as profitable as it otherwise would be since Uncle Sam wishes to wring as much profit out of the illegal drug business as it possibly can.

It did the same thing with cigarettes.

You see, IRS agents aren't raiding these businesses and shutting them down. They aren't rejecting their tax returns. They aren't refusing the drug-tainted proceeds. They aren't even demanding all the proceeds.

They just want a larger fucking cut and they want that money sent toot fucking sweet, bitch.

Or else the ATF they'll come a callin and they'll burn down your house and burn your kids to death just like they did in Waco, Texas.

So pay up bitches.

peter hoh said...

Shouting Thomas wrote: I thought Obama toked up when he was younger.

Gee, that deserves an "Obama is like Bush" tag.

Ralph L said...

You're confusing Bush with Gore. Bush drank a lot, the rest is rumor.

So the drug dealers must campaign for lower corporate tax rates! Turn them into free-market Republicans.

Ut said...

"So the drug dealers must campaign for lower corporate tax rates!"

What the hippies need to do is to stop voting for Barack Obama and his job-killing, buzz-killing IRS policies.

Barack Obama is stealing your dope money. Stop fucking electing him.

Ut said...

"I thought Obama toked up when he was younger."

Barack Obama (writing in his memoir Dreams of My Father): "Pot had helped, and booze; maybe a little blow when you could afford it. Not smack, though."

Obama claims he smoked marijuana and snorted cocaine, but that he did not get into injecting heroin. He was a coke junkie.

Fairly typical druggie behavior for a young black Muslim in Kenya.

Coketown said...

@Julius: Trying to cook your books when your sole vendor for product is the state you operate in and all transactions are recorded in detail doesn't strike me as a very brilliant move.

The pot lobby would have been smart resist the temptation of framing the debate on pathological grounds and instead expend more effort on the federalism argument. But they took the easy route, even though everyone knew the pretense of medicine was bullshit on its face.

EDH said...

So the drug dealers must campaign for lower corporate tax rates! Turn them into free-market Republicans.

Yes, there is huge irony here for much of the "tax rates don't matter" crowd.

Revenant said...

The government is in the wrong.

The reason they are in the wrong is that they expect the businesses to pay income taxes on their profits. If they are acknowledging that the businesses are engaged in a taxable business enterprise, they have to let them take applicable deductions.

Julius said...
This comment has been removed by the author.
Julius said...

@Coketown-

...even though everyone knew the pretense of medicine was bullshit on its face...

I have a neurological condition similar to Tourette's syndrome. Over the years I've tried every possible medication for it, including Haldol, Oral, Elavil, Depakote, Xanax, Klonopin, and others.

Medical marijuana is the only thing I've tried that is effective. I don't use it because it is not legal in the state where I am now living, although it is nonetheless widely available.

But it's good to know that my knowledge about my own medical condition, acquired after decades of trial-and-error, and long periods suffering either from a debilitating condition or from extremely uncomfortable side effects of a medicine that might possibly hopefully work just a little bit, is just "bullshit on its face".

Fuck you, you judgmental asshole. You insult my lifetime of experience with your little political quip.

I hope, honestly and sincerely, that you someday develop a lifelong debilitating medical condition. I hope your children and grandchildren do too, and spend their formative years getting harassed and beat upon and labeled a "freak" like I was.

You are scum. Nothing less.

Beldar said...

This is only of consequence to two sorts of people:

(1) Those who pay their federal income taxes voluntarily; and

(2) Those who don't, but get caught.

I suspect that at least over the short and middle term, and in many instances even in the long term, the vast majority of the people running these businesses fall into the third category -- those who don't pay their lawfully owed taxes but don't get caught.

Will said...

If the supremacy clause means anything, then the feds are in fact being pretty lenient. Marijuana is illegal under federal law, and federal law trumps state law. Just because the administration is falling down on the job of enforcing that law, for partisan political reasons, doesn't make running a dispensary legal.

And, sorry Julius, but Coketown is right. The Medical Marijuana argument is bullshit. There may be a few people using it legitimately to help with things that are not helped by conventional medicine, but in the State of Colorado, 4 doctors write 80%+ of marijuana prescriptions. And the majority of prescriptions are for non-specific aches and pains, usually back pain. Not Chemo and Glaucoma.

pauls lane said...

If I ran a smuggling operation and smuggled widgets into the country and sold them for a profit, I would expect the IRS to want their cut of my profits but I doubt they would accept the depreciation of my boat, my purchases of gas, or my pre-paid cell phone as legit businesses expense. After all my entire widget enterprise is not legit. Thus operating medical marijuana enterprises while perhaps legal in some states is still a federal crime and not a legit business enterprise. Some here appear upset by the IRS decision but they are doing exactly what they are supposed to do, collect revenue for the U.S. Government.

If anyone needs a cheap widget let me know.

Julius said...

@Will-

Well, thank you for doing your part too to deny people like me the medicine we need to live a normal, functional life.

You are just as big a Scumbagger as Coketown is. I hope you find yourself suffering from some debilitating, long-lasting medical problem. I hope your kids do too. This is not so that you can understand, just so that you can suffer the suffering you so very much deserve.

pauls lane said...

also Anne is correct, this could very well be a method used by the feds to stop this type of business. UT's example is as admitted simplified, but he focuses on the IRS take. Using those numbers, the drug dealer's
take home pay, so to speak drops from 32500 to 15000. A HUGELY significant decrease. If my income were to drop by more than half in my widget dealing, I might need to consider another line of legal or illegal work.

Will said...

@Julius: I don't have kids, and I'm not likely to. And I do have a chronic condition that requires expensive treatment. So tough cheese.

Also, did I say that I opposed legalizing marijuana? No. I frankly have no opinion on that subject.

I do, however, dislike the mendacious "medical" argument that is being used as cover for people to legitimize recreational drug use.

Julius said...

Well, Will, can you get treatment for your condition?

I can't! And the reason I can't is because of people like you and Coketown, you fucking Statist thugs...

I really don't give a flying fuck what reasons other people might have for getting medical marijuana. That's their problem and shouldn't be mine. I only know that I would be getting it for legitimately medical reasons, after trying all other possible drugs.

Revenant said...

I do, however, dislike the mendacious "medical" argument that is being used as cover for people to legitimize recreational drug use.

But apparently you've no problem with the mendacious "marijuana is dangerous" and "marijuana has no legitimate medical use" arguments presented by the government.

ken in sc said...

Does Tourette's syndrome, or a similar disorder, cause you to involuntarily type out stupid stuff,such as,'I hope you get a disease and suffer, and your children too?'

RobertT said...

For whatever reason, the wheels are coming off at the IRS and have been for the last few years. It is a common issue and has been addressed by the AICPA. This particular instance is an issue of the IRS not understanding the legislative history of the 16th amendment and the decisions in such Supreme Court cases as Glenshaw Glass, in which it was held that tax would not be levied if the taxpayer did not accede to gain. And furthermore decided expenditures that were ordinary, necessary and reasonable are deductible. As far as I understand the constitution, state law overrules federal law on matters of criminal activity. But perhaps not. I will be surprised if the the IRS wins on court. But, as in Murphy, it may very well depend on which side the adademics come down.

peter hoh said...

Hey, another topic on which Rev and I can sing Kumbaya.

Doc Merlin said...

Because ultimately the IRS is the same as a general policing power. Don't mock it, once income tax came into being, there really wasn't anything holding back the federal government.

pauls lane said...

I am not so sure as Robert T about any state law overruling federal law or any matter.

M. Simon said...

Julius,

Oh. Yeah!

====

If something is to be done it will probably have to be done by Republicans. They are not there yet. I'd give it another 5 years.

M. Simon said...

Ken,

Does Tourette's syndrome, or a similar disorder, cause you to involuntarily type out stupid stuff,such as,'I hope you get a disease and suffer, and your children too?'

Yeah. That was insensitive. He should have added "and cannabis is the only known palliative."

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