Greenspoon Marder Client Alert: First Federal Sentencing of Legal Marijuana Business Owner For Tax Crimes

Cannabis Blog Sep 21, 2018 Denver, CO

A medical marijuana dispensary owner-operator in Oregon was sentenced to seven months in prison this week, in what appears to be the first federal sentencing of a legal cannabis business owner for tax crimes. Matthew Price pleaded guilty to willfully failing to file income tax returns in connection with his cannabis stores, and did not file individual tax returns from 2011 to 2014 for income received from the dispensaries’ operations.

“As with any business, marijuana business owners must operate in strict compliance of the local, state and even federal tax laws,” said Rachel Gillette, a partner and chair of Greenspoon Marder’s Cannabis practice. For cannabis businesses, tax compliance is part of operating in a state-legal marketplace, and includes understanding IRC §280E and how it affects these companies and owners of flow-through marijuana entities. “A tax issue can cause big problems for marijuana businesses and business owners as most states require license holders to be ‘tax compliant’ in order to maintain the license,” Gillette said.

The IRS already keeps a close watch on the cannabis industry, and marijuana businesses are audited at greater rates than other businesses. This is due in part to the IRS’s aggressive application of the 1982 tax code provision §280E, which prevents businesses that are engaged in “drug trafficking,” including marijuana, from taking regular deductions. Because many business owners and even tax accountants do not know how §280E applies, it often causes tax deficiencies for businesses and business owners, even with their best efforts. “The Price sentencing is a tax evasion case that serves as a good reminder to cannabis industry executives on the importance of legal and tax planning,” Gillette concluded.

About Greenspoon Marder

Greenspoon Marder is a national full-service business law firm with over 200 attorneys and offices across the United States. We are ranked among American Lawyer’s Am Law 200, as one of the top law firms in the U.S. since 2015. Our firm was founded with the goal of providing the highest quality legal services at the highest value for our clients. Each of our clients is unique and so are their legal needs. We believe no one size fits all for professional services. Our lawyers offer flexible and creative solutions to meet our clients’ respective needs. Our mission is to understand the challenges our clients face, build collaborative relationships and craft solutions with a focus on strategic goals.

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This Greenspoon Marder LLP Client Alert is issued for informational purposes only and is not intended to be construed or used as general legal advice nor a solicitation of any type. Please contact the author(s) or your Greenspoon Marder LLP contact if you have any questions regarding the currency of this information. The hiring of a lawyer is an important decision. Before you decide, ask for written information about the lawyer’s legal qualifications and experience.

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