Denver Medical Dispensary Petitions Supreme Court in IRS Lawsuit – Westword


A Denver dispensary wants to take the Internal Revenue Service to the United States Supreme Court in what has become an ongoing conflict between federal tax collectors and the legal marijuana industry.

In April, the Tenth Circuit Court of Appeals ruled in favor of the IRS against owners of medical marijuana dispensary Standing Akimbo, finding that a 2017 audit of the shop’s owners didn’t overstep the IRS’s investigative authority, and that marijuana businesses are not entitled to federal tax deductions. Grasping one of their last straws in a years-long legal battle against the IRS, Standing Akimbo owners Peter Hermes, Kevin Desilet and John Murphy filed a petition with the Supreme Court on November 6 to appeal the Tenth Circuit decision from earlier this year.

Because marijuana is federally illegal, the commercial pot industry is prohibited from claiming tax deductions under IRS tax code 280E, which bans deductions from applicants whose revenue “consists of trafficking in controlled substances.” Under a different law that also cites the Controlled Substances Act, federally regulated banks and insurance companies are blocked from serving marijuana businesses.

Chances of the case being heard are slim, but if successful, it could allow state-legal marijuana businesses to file tax deductions and access banking services.

In May 2017, the IRS opened an audit into Standing Akimbo under suspicion that the medical marijuana company claimed business deductions in tax filings in 2014 and 2015. The IRS requested tax returns and financial documents from Standing Akimbo, but ownership held back state Marijuana Enforcement Division tracking and compliance reports, claiming that the IRS was investigating a federal drug crime rather than a tax crime.

The IRS didn’t stop there, however, and requested the state tracking reports via a third-party summons with the MED. In Colorado Federal District Court, the owners of Standing Akimbo filed a petition to stop

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