Medical Marijuana Dispensary Operators Facing New Threats

In the early days of medical marijuana dispensaries, the risk was all about possible arrest and prosecution.  Judging by recent news stories this week, the greatest threats now seem to be from: 1) the Internal Revenue Service, 2) new regulations and rival dispensaries, and 3) gangsters who rob dispensaries.

Taxation of Marijuana Dispensaries

In 2009, after Obama took office, his attorney general Eric Holder announced that the federal government would not prosecute marijuana dispensaries that were operating legally under State and local laws.  Dispensary owners probably breathed a sigh of relief.  Little did they know that they would face perhaps larger problems from the IRS.  The IRS is currently auditing every dispensary across California, and is apparently disallowing a lot of deductions that many took for granted.  Here is the issue: Under section 280E of the federal tax code, people selling controlled substances in violation of federal law can’t claim any tax deductions for their “business”.  This statute was intended so that Al Capone types would have to pay taxes on their gross, and they can’t deduct all their “expenses” in figuring their “profit”.  The “expenses” of selling controlled substances means, the initial cost of the drugs from the suppliers, transportation costs, the costs of paying employee dealers, etc. This makes sense, I suppose, when going after black market criminal enterprises, but this makes less sense when going after gray-market medical marijuana dispensaries that are trying their best to serve patients.  Some of the dispensaries are faced with  millions of dollars of past due taxes.  I blogged last December about the Washington Department of Revenue gouging marijuana dispensaries in Spokane.

New Regulations & Rival Marijuana Dispensaries

In Colorado, the number of dispensaries operating state wide grew to over a thousand after the Obama administration indicated that they would not be prosecuting dispensaries.  These 1000 dispensaries are now facing increased regulation from the Colorado legislature.   In Colorado, the legislature banned convicted felons from operating dispensaries, and then began requiring dispensaries to start growing at least 70% of their own marijuana.  In Los Angeles today, the city announced that they would be shutting down 140 dispensaries for the failure to follow the city regulations.  Meanwhile, dispensary owners from Spokane to Seattle are bracing themselves for SB 5073, also known as the Kohl-Welles bill, which would outlaw just about every dispensary in Washington that exists today.  With all these threats, you would think that the dispensaries would be joining together.  In fact, the dispensaries seem to be fighting each other, or at least their customers.  Try googling “Spokane Medical Marijuana”.  What you see is a bunch of online “reviews” where people are just trashing dispensaries.  You really don’t see the same thing in the Seattle listings.

Robbery of Medical Marijuana Dispensaries

If a visit from the IRS isn’t scary enough, check out this video footage of a Washington medical marijuana dispensary getting robbed.

The police reports in the case indicated that the victim tried to spray the robbers with mace but had difficulty in using the canister. The robbers were known to the victim because they were patients in the past. About 10 pounds of marijuana was stolen.

What do you think of all this?  If you owned a dispensary, would you be looking for another line of work?

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Steve Graham is a criminal defense lawyer, and he splits his time between Spokane and Seattle, Washington. Visit his website by clicking:
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1312 North Monroe Street, #140
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