May 1, 2014 in City
Washington state pursuing medical pot dispensaries’ taxes
OLYMPIA – The state Revenue Department is stepping up efforts to make medical marijuana dispensaries pay their taxes.
After more than two years of “educational outreach” designed to teach medical marijuana businesses that they must register with the state and pay taxes, the department says in a memo this week it will go after dispensaries that continue to ignore the law.
The state has several hundred dispensaries. The exact number isn’t known because many aren’t registered and the ones that are can’t be easily gleaned from business licenses. There’s no national code for marijuana businesses, although the state is developing one, said Kim Schmanke, a department spokeswoman.
Dispensaries owe business and occupation taxes on their gross receipts. They must also collect and send in sales tax on marijuana and “medibles,” edible products containing the drug.
Since late 2011, the department has told dispensaries they must collect the sales tax because the state’s exemption for prescription drugs doesn’t apply to marijuana. In January, it sent letters to hundreds of dispensaries explaining they must register and pay taxes.
In a recent memo, Drew Shirk, the assistant director for legislation and policy, said the state contacted 323 medical marijuana businesses earlier this year it believed were unregistered. About a fourth said they were registered under another name, and 4 percent filed new registrations.
But 60 percent didn’t respond and nearly 1 in 10 said medical marijuana wasn’t taxable.
Wrong on that last count, Shirk said in the memo. A recent state Appeals Court decision says collective gardens, which provide the marijuana for many dispensaries, aren’t legal under state law. But that doesn’t mean the dispensaries get out of taxes or registering as a business.
“Whether legal or not, the sale of medical marijuana is a taxable activity, absent an applicable exemption,” Shirk said.
The court case had no bearing on the timing of the memo, Schmanke said. The department was waiting to see if the Legislature would change the laws involving medical marijuana. It didn’t, so the department starts its new enforcement efforts this month.
The state has 286 registered medical marijuana businesses, the memo says, and about 100 aren’t reporting any income so they aren’t paying taxes. The department plans to contact them with information on how to report taxes if they are making money and give them 30 days to correct any errors. After that it will follow up, issue estimated tax assessments where appropriate and start collecting on any delinquent accounts.
That’s how any registered business is handled, the memo says.
It will also begin enforcement efforts with unregistered businesses, starting with education and using “tax discovery procedures” if needed.