The Internal Revenue Service has settled a legal dispute with a medical marijuana dispensary by agreeing to refund approximately $25,000 in fines and abate future penalties.
The IRS had imposed the penalties on Allgreens because the unbanked business had been paying its taxes in cash. IRS rules require businesses to remit employee withholding payments electronically or face a 10 percent penalty. However, Allgreens argued that since it did not have a bank account, it had to make the payments in cash, according to the
Many banks refuse to do business with marijuana dispensaries because the substance is still illegal under federal law, even though an increasing number of states allow medical and in some cases recreational use, including Colorado.
Allgreens filed a petition in U.S. Tax Court, arguing that it should not be penalized since it was complying with the law by making its tax payments on time. The IRS argued that Allgreens could use a third-party service to make the payments electronically, but Allgreens countered that this could subject the other party to money-laundering charges.
The IRS eventually agreed to settle the case and refund about $25,000 in penalties. It is not clear whether the case could apply to other medical marijuana dispensaries, although Allgreens’ attorney believes it might.
