Nearly two years after passage of Senate Bill 5073 (now, RCW 69.51A), Washington State’s Department of Revenue (DOR) plans to engage the medical marijuana industry about the current state of medical marijuana taxation in Washington.
Though the DOR website has since May 2011 stated that retail sales tax applies to medical marijuana transactions, most MMJ entrepreneurs claimed otherwise. MMJ entrepreneurs argued that because they were non profits, their marijuana transactions were donations, not sales and they were therefore not subject to any sales tax. The DOR 2011 response was to call for sales tax payments:
Sales of medical cannabis are not eligible for the retail sales tax exemption provided for prescription drugs. RCW 82.08.0281 provides an exemption from retail sales tax for certain drugs, but only when prescribed as authorized by the laws of this state. However, cannabis is a Schedule I controlled substance and cannot be prescribed under either federal or state law in Washington.
After a slew of Washington medical marijuana operators refused to submit to the retail sales tax levy, it appears the DOR now plans to get their attention through its new MMJ taxation by mailing letters to several hundred businesses and organizations that provide medical marijuana, “medibles,” and related products, explaining that taxes apply to their transactions. Dispensaries, collectives, cooperatives, nonprofits and businesses that should be — but are not — registered with Revenue or paying taxes will be getting these letters
Though some MMJ operations will no doubt be facing audits or back tax assessments, we as cannabis lawyers take at least some comfort from the fact that the MMJ community finally has a clear answer regarding sales tax on MMJ transactions.