New Tax on Medical Devices

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Beginning on January 1, 2013, medical device manufacturers will have to pay a 2.3% tax on the gross income from many of their products.

The excise tax is on the medical device manufacturers and importers (who) will now have access to 30 million new customers due to the health care law.

~ Treasury Department spokeswoman, Sabrina Siddiqui

I’m not sure what is meant by this statement.  She appears to be justifying the new law in hopes that these companies won’t see it as the tax problem that it is.  She appears to be saying that the new tax should not be difficult to pay since medical device makers will have so much more business under Obamacare.

The new tax does not cover over-the-counter medical products such as hearing aids, eyeglasses, or cotton swabs.  It mostly applies to devices used by doctors and nurses inside medical facilities. There seems to be some ambiguity in the law with respect to items that could be considered medical or non-medical, such as latex gloves. Job security for the tax attorney, I suppose.

Pot Permits Suspended in Sacramento

Tonight the Sacramento City Council voted to halt issuance of any new medical marijuana dispensary permits until the dust settles from the federal crackdown. But don’t take this to mean that the city will be surrendering to the bullying of the feds, not as long as there is revenue to be collected from the pot shops. In fact, tonight’s vote actually extended the deadline to submit new permit applications until May 2012 and it extended the final day that dispensaries can operate without a permit from January 2012 to August 2012. Read full story here.

Feds Say CA Pot Shops are Just Fronts for Illegal Trafficking

Today the US Attorneys announced that they are cracking down on marijuana dispensaries in California, not because they are illegal under federal law (although they are) or because they are not paying their taxes.  No, the real problem is that many of them, as they are currently operating, are illegal under California law.

Federal prosecutors have evidence that many of the pot dispensary storefronts are just that —fronts for illegal drug trafficking operations. They say that these operations have reached levels that were never intended when medical pot was legalized back in 1996.

Here’s what makes them illegal:

  • large-scale commercial operations
  • drug trafficking across state lines
  • owners reaping huge profits
  • non-medical usage of product

Not all pot shops in California fit this description, and that’s why only certain shops are being targeted by the feds. But today’s announcement was certainly meant to shake things up in an industry that was never meant to become an industry.

Feds Threaten to Shut Down CA Pot Shops

It seems the recent IRS audit of Harborside Health Centerwas only foreshadowing of something bigger. The tax problems were the least of their worries.

Several California marijuana dispensaries received love letters this week from the US Attorneys Office demanding that they shut down in 45 days or face criminal charges. Pot dispensaries operate legally under California law, but they are in violation of federal drug laws, and we all know which law prevails in situations like these.

Letters also went out to landlords graciously giving them the option of evicting their pot-selling tenants or risk seizure of their property by the federal government. Those who have followed this power struggle for the last few years are not surprised by what is going on; they see it as the United States simply following through on its threats.

Those who operate pot dispensaries understand that only a limited segment of the population will accept the position that they provide an indispensable service to society. Instead they focus on all the tax dollars that they have generated over the years. Even so, I think they’re wasting their breath. The feds have sent a very strong and clear message lately, through multiple agencies, including the FBIIRSDEA, even the EPA.

See full AP story here.

There should be more information tomorrow because the US attorneys are supposed to make a special announcement.

Weed Wars in Oakland, CA

Oakland’s Harborside pot dispensary has a nifty slogan: “Out of the Shadows, Into the Light.” It’s actually a pretty good description of what the Internal Revenue Service has done with their tax returns recently.

Ever since California legalized marijuana for medical purposes, pot shops here are thriving . . . but not if the IRS can help it. The IRS recently audited the 2007 and 2008 returns of Oakland’s Harborside Health Center and hit them with a $2.4 million tax bill. It sounds like a lot of money, but Harborside’s is a huge dispensary with 84 full-time employees and gross revenues of $22 million a year. And what really inflated the tax bill is the IRS’s disallowance of their business expenses. Well, the IRS did allow them to deduct the cost of “medicine” purchased (that’s what Harborside calls it on their website), but nothing more. The IRS’s position is based on an old rule forbidding business expense deductions for operations that traffic in illegal drugs.

I have no idea why the IRS would question the legitimacy of this joint knowing they are the official 1st place winner of the coveted 2011 High Times Medical Cannabis Cup.

Harborside is fighting the audit and publicizing their good deeds, like the fact that they are pumping all kinds of money into the local economy. On Friday, September 30th, Harborside made a ceremony out of its $360,000 city tax payment as if it were some kind of voluntary contribution.

** I can’t take credit for the clever title of this blog post. The Discovery Channel will be airing a reality show based on the Harborside drama called “Weed Wars.”