Collecting Taxes from Medical Marijuana in Washington State
Tax officials in Washington State have begun auditing medical marijuana dispensaries, dispensaries that are not technically allowed under state law.
Since 2010 the state Department of Revenue has been telling marijuana operations that they must remit sales taxes on their transactions. About 50 dispensaries have registered with the state, bringing in some $750,000 in taxes from the industry over the span of one year.
“We’ve been doing the educational part and now we’re doing the enforcement part,” said Mike Gowrylow, a spokesman for the Department of Revenue.
But Seattle medical marijuana lawyer Douglas Hiatt said he doesn’t believe the state can tax medical marijuana sales, and says he would not allow one of his clients to cooperate with an audit.
“There’s no way they can do this,” Hiatt said. “DOR doesn’t have the power to tax marijuana. It’s not only that you can’t tax it because it’s illegal, it’s that you can’t tax it because it’s medicine. There’s an exemption for prescription medicine under state law, and an authorization is the functional equivalent of a prescription.”
Steve Sarich - who runs a medical marijuana establishment in Seattle called Access 4 Washington - said any money exchanged at his facility is a donation to the collective effort of producing the marijuana. He noted that it is illegal to sell marijuana under both state and federal law, so it would be hard for any medical marijuana provider to claim sales of the drug.
“If you pay sales tax, you’re admitting to sales,” Sarich said. “I wouldn’t advise anyone to do that.”
Herein lies the problem with incomplete medical marijuana laws. Any functional MMJ law needs to have provisions for growing one’s own medicine as well a dispensary system to sell the medicine. If dispensaries were legal in Washington, then the issue of taxation could be discussed.
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