A medicinal marijuana clinic in Oakland called the Harborside Health Center was recently slapped with a $2.4 million tax debt. An audit recently finished for tax years 2007 and 2008; disallowed all of their expenses. Why? There’s a tax code from 1982 that states you can’t claim cost deductions on your business tax returns, if your business traffics illegal drugs.
Steve DeAngelo, the CEO of Harborside Health Center, believes the IRS was out of line. His argument is that a medicinal marijuana clinic is legal and not a drug trafficking organization. In fact, even the auditors in charge stated that all product expenses were properly deducted.
DeAngelo has hired a tax attorney and has until December 22nd to contest the audit findings. He’ll also need to prepare for more audits on 2009 and 2010. While DeAngelo is concerned with the government’s threats to shut down his business, he doesn’t seem to be reluctant to pay what he feels he owes in business tax. Just last month, Harborside established itself as one of the top ten taxpayers in Oakland. DeAngelo even stated he was delighted to contribute to his community.
The IRS is not going to stop with Harborside Health Center. They have already begun auditing other medicinal marijuana dispensaries. The people running these operations seem to be genuinely concerned that they will no longer be allowed to operate and that their patients will be left out in the cold.
These recent IRS audits coupled with the Federal government’s threat to seize any property being used for marijuana production have caused a big ruckus among legalized medicinal marijuana supporters. Even state officials are writing the Senate regarding this. Advocates argue that forcing dispensaries to shut down with outrageous business tax bills will only cause illegal drug trafficking.
Whether you believe marijuana should be legal or not, one thing is for certain: There doesn’t seem to be a limit to what the IRS will do to collect on business tax. If they can shut down an entire industry simply by performing audits, imagine what they can do to your business. This is why it’s important to be armed with information and work with a tax representation firm.
If you are having business tax problems , you need the biggest guns in the industry. That’s what the Hit Squad is here for. Don’t let the IRS shut down your doors and your dreams. We can help you with your business and payroll taxes, and keep the IRS away!