Marijuana is illegal under federal law, so should the IRS be able to collect taxes on Colorado pot sales?

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(CNN) — Some Colorado marijuana sellers are challenging Uncle Sam. They’re filing a lawsuit — saying the IRS shouldn’t be allowed to collect taxes on marijuana sales because marijuana is illegal under federal law.

Attorney Rob Corry says forcing Colorado’s recreational marijuana businesses to pay violates the United States Constitution.

He has filed a lawsuit in District Court on behalf of clients, some of whom say taxes could be used as evidence in any future prosecution.

“They’re open records and they are admitting to a federal crime. It’s still a federal crime to sell marijuana,” Corry said.

Recreational marijuana was legalized in Colorado on the condition sales would be heavily taxed — with proceeds going toward schools and regulation.

Even the federal government gets its share.

“The federal government takes money from a criminal enterprise. That’s part of money laundering — when they can seize the money because it’s illegal, but then to take it in and use the money?” Tom Gorman, who heads the Federal Drug Task Force said.

Attorney Amanda Cruser, who once worked in the Justice Department’s Tax Division says the IRS just wants its money.

“They can collect taxes on gross income from whatever source derived. So therefore, they don’t care whether it’s non-legal or legal source income,” Cruser said.

Last summer, the Justice Department said it will not interfere with recreational marijuana industries in Colorado and Washington state — for now.

“We don’t know what a new president is going to do, and of course we know we are going to have a new president,” Corry said.

“I think the federal government needs to make up its mind, whether they have supremacy over state law,” Gorman said.

If the feds do decide at some point to prosecute marijuana businesses, Cruser says it won’t be difficult.

“Frankl,y if you’re operating that business and you have a store front, it’s blatantly obvious what you’re doing,” Cruser said.

Cruser emphasizes — folks should be paying their taxes.

What do you think?


  • Robert Chase

    This story is wildly inaccurate. The plaintiffs in the suit are not “marijuana sellers”, but marijuana buyers, who do not want to incriminate themselves by paying tax on an illicit transaction. The media have completely falsified the reality of what is happening in Colorado: we did not legalize marijuana in any general sense. Outside our dispensary system, not operating in most of Colorado, any sale is a felony and growing enough for personal use is a felony. Gov. Hack and our anti-representatives in the General Assembly not only reinstituted all the felonies for cannabis last year, they increased their maximum severity to a Class 1 felony, like premeditated murder. Colorado’s Establishment is determined to keep making felons of Coloradans over cannabis!

    • John Phoenix

      Growing enough for personal use a felony?? I thought voters in Colorado approved 6 ( or in Denver if you have a wife or husband) 12 plants to grow for personal use. I do not believe this would be a felony, in the state itself even if it is still a felony on the federal level. I plan to move from New Orleans to Colorado this year for the sole purpose of buying a house, and growing and smoking my 12 plants. I’m retired at 46 and only want to relax for the rest of my life.

  • Kathleen Chippi

    I agree with Robert–get your facts straight. Seems like CNN is confusing Rob’s lawsuit (retail sales taxation of cannabis illegal for the state government IF MMJ is NOT legal in CO–like the CO AG is arguing (against the voters intent) in the CO Supreme Court Right now) with the ‘industry’ lawsuit that addresses income taxes w/the business owners and the IRS.

    If cannabis is still illegal in CO for MMJ and MJ for the voters….then it’s got to still be illegal for the state gov. Isn’t it ‘curious’ the pot shops cannot use the banks for the pot businesses but the state can use JP Morgan Chase to launder over 10 million yearly (super kingpin status under federal law) the pot tax $$$…….hmmm

  • Kathleen Chippi

    oopppss—FOX and CNN are both confused……I guess no one does investigative reporting anymore.

    • John Phoenix

      I suppose it’s possible they are misreporting the news on purpose to confuse people on the issues. Most news agencies are under the control of the federal government, and I’m sure Fox 6 is no exception. These news outlets use “Spin” constantly to reach an agenda – don’t let them tell you otherwise.

  • d.

    Recalling my Fed Tax class – income is broadly defined to capture any and all revenue streams. The IRS will be getting a cut of marijuana money somewhere. They need to quickly clarify rules on declaring marijuana related income for growers, retailers, and employees to efficiently pay applicable taxes. We must legitimize this industry by creating the necessary infrastructure for it to succeed in the sunshine. The black market – much like alcohol prohibition – has thrived in a niche and will be a huge competitor for the legal industry for some time. Creating clear rules regarding financing and taxation would ease some barriers and reduce costs for regulated industry members. Bringing a subversive counter culture suddenly above board is going to ruffle a lot of feathers on more sides of the fence than you thought existed. This is a policy change that requires patience and trust – a willingness to follow the letter & spirit of the law in order to progress the legitimate movement and stampt out the black market, which represents the true threat to public safety.

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