The Internal Revenue Service has opened an audit of a Denver medical-marijuana dispensary, the latest action in what one observer calls a "guerrilla campaign" by the federal government to push back against the cannabis industry.
The audit is believed to be the first of its kind in Colorado and follows audits of numerous medical-marijuana dispensaries in California and other states.
Investigators are examining whether it was unlawful for the dispensaries — which are illegal enterprises under federal law — to deduct business expenses from their federal taxes, said Jim Marty, a Denver accountant who represents the Colorado dispensary.
Marty declined to name the dispensary or say where it is located. Marty said the dispensary was notified of the audit earlier this month.
"So far," he said, "the IRS has been pretty cooperative. . . . The client had good records."
Marty said he expects the IRS to look broadly at dispensaries in Colorado. If so, that would mirror what the agency has done in California, where tax attorney Henry Wykowski said the IRS has undertaken at least 30 audits of dispensaries.
The audits are also part of a bigger series of events in which the federal government appears to be more actively asserting itself in state-legal marijuana businesses.
In recent months, U.S. attorneys in Washington state and California have sent letters to state officials there warning them that efforts to regulate medical-marijuana businesses will not change the federal government's disapproval of those businesses.
In one letter, U.S. attorneys in Washington warn Gov. Christine Gregoire that state employees who regulate the businesses "would not be immune from liability."
In addition to the IRS audits, the federal government has asserted its authority by raiding medical-marijuana dispensaries. Last month, federal agents served 26 criminal search warrants in Montana during a drug-trafficking investigation that focused on dispensaries. The agents allege the dispensaries were also engaged in other illegal activities.
Because federal law enforcement resources are so limited, Robert Mikos, a Vanderbilt University law professor who has studied medical-marijuana laws, said the government has had to be selective in how it targets medical marijuana, conducting more of a "guerrilla campaign" than a frontal assault.
Colorado Attorney General John Suthers believes the recent crackdown should be a warning to Colorado medical-marijuana providers and state lawmakers alike.
But so far — the recent IRS audit aside — Colorado has seen relatively little federal enforcement against cannabis businesses, despite having the most well-codified medical-marijuana regulatory system in the nation. Dan Hartman, who oversees medical-marijuana industry regulation in Colorado, said state officials have met repeatedly with federal authorities to keep them apprised of the state's evolving regulations. That has included providing limited, public information about dispensaries if the federal agents request it.
Hartman said federal officials, during the meetings, have remained firm that they see medical-marijuana businesses as illegal.
But Hartman thinks the dialogue has helped prevent public blowups. "We started out in the beginning to make sure we have a transparent business."
Still, Allen St. Pierre, the executive director of the National Organization for the Reform of Marijuana Laws, told an audience at his group's annual convention in Denver last week that recent events are a reminder the medical marijuana industry remains a perilous business.
"One cannot whistle by the graveyard when it comes to medical cannabis," he said.
Dear Drugs-Forum readers: We are a small non-profit that runs one of the most read drug information & addiction help websites in the world. We serve over 4 million readers per month, and have costs like all popular websites: servers, hosting, licenses and software. To protect our independence we do not run ads. We take no government funds. We run on donations which average $25. If everyone reading this would donate $5 then this fund raiser would be done in an hour. If Drugs-Forum is useful to you, take one minute to keep it online another year by donating whatever you can today. Donations are currently not sufficient to pay our bills and keep the site up. Your help is most welcome. Thank you.