Whatever your opinion on the legalization of marijuana — both for medicinal and recreational uses — it's become increasingly clear that banking and tax laws need to be adjusted for the safety and security of both businesses and customers.
As David Migoya reports in the Denver Post, Rep. Ed Perlmutter continues his push to find some sort of fair middle ground for pot shops that are being forced to conduct most of their business operations entirely in cash:
U.S. Sen. Michael Bennet and Rep. Ed Perlmutter on Friday asked the Internal Revenue Service to stop assessing a 10 percent penalty on legal marijuana businesses that are forced to pay federal withholding taxes in cash for lack of banking services.
In a joint letter to IRS Commissioner John Koskinen, Bennet and Perlmutter, both Democrats, noted how pot shops in Colorado often have little choice but to pay employee withholding taxes in cash since banks won't take their business.
IRS rules require the taxes to be paid via the Electronic Federal Tax Payment System, and businesses that don't comply face a 10 percent penalty on the tax.
News of the practice came to light when The Denver Post last week reported about a Denver dispensary's legal efforts to challenge the IRS…
…Another problem is that businesses willing to pay the IRS assessment — often amounting to tens of thousands of dollars — can't get an installment plan as other businesses do because they remain out of compliance and subject to additional penalties, according to the attorney who is challenging the fines in U.S. Tax Court. As a result, a legal marijuana shop's operating license is in jeopardy — despite paying their taxes on time — because state law requires them to be in compliance with all federal and state tax laws.
This problem seems particularly ludicrous — again, no matter your opinion on marijuana — because pot shops have absolutely no option for avoiding the 10% penalty they are assessed for not using banking services. The federal government still doesn't allow banks to accept deposits from marijuana businesses, so how, exactly, are they supposed to comply with IRS rules requiring the use of banking services? We're not going to allow you to deposit money in a bank…but we are going to fine you for not having a bank account.
We wouldn't expect Congress to take action on this issue, since Republican House leadership has largely pledged not to take action on, well, anything beyond getting mad at President Obama for trying to govern while they race office chairs up and down the hall. But this is a pretty good issue for potential bipartisan support if there ever was such a thing. Republicans are normally jumping at the chance to prevent the federal government from infringing on state's rights; when you include the opportunity to complain about the IRS at the same time, this should be a slam dunk for the GOP. And again, this is a serious safety issue when you force an industry to carry around massive amounts of cash; why bother robbing a bank when you'll get more cash out of a pot shop that had a good weekend?
If and when federal law is finally changed to accommodate changes created by state elections, Rep. Perlmutter should get the credit he deserves for being at the forefront of a set of issues that really do affect Coloradans of all stripes.