Marijuana Dispensary Sues IRS Over Cash-Only Rule

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A medical marijuana dispensary in Colorado is challenging the Internal Revenue Service’s policy of charging extra fees to companies that pay taxes in cash.

Allgreens, a dispensary in Denver, filed a lawsuit against the IRS this week because the agency assesses a 10% penalty on businesses that pay their federal employee withholding taxes in cash, according to the Denver Post.

The lawsuit argues that the policy is unfair, given that Allgreens and other marijuana businesses are not able to open bank accounts due to the federal prohibition on marijuana.

The IRS has previously advised the companies to avoid the 10% charge by funneling cash to a third party that can then make the tax payments on their behalf. But Allgreens’ lawyer, Rachel Gillette, argues that this method amounts to illegal money laundering.

, Marijuana Dispensary Sues IRS Over Cash-Only RuleAllgreens was able to pay its taxes electronically until 2012, when the company’s bank closed its account. Since then, the business has hand-delivered tax payments twice a month to the IRS office in Denver., according to the Post. Each payment requires an appointment, and the process often takes the majority of a day to complete.

As a result, the IRS says Allgreens owes more than $20,000 in penalties from December 2012 through December 2013. The agency has filed a lien against the business.