IRS Refunds Tax Penalty to MMJ Dispensary

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The Internal Revenue Service has agreed in a settlement to refund roughly $25,000 in fines it levied against a medical marijuana dispensary in Colorado, following a dispute that could have resulted in a precedent-setting decision by the U.S. Tax Court.

The settlement came after Denver-based Allgreens, an MMJ dispensary, filed a complaint with the Tax Court after the IRS refused to waive a 10% penalty on the business because it didn’t comply with a requirement that companies withhold employee taxes electronically. Allgreens contended that it couldn’t comply because it’s had difficulty finding banking services, but it still paid all of its taxes on time and in cash.

The IRS relented this week, and agreed to pay back around $25,000 to Allgreens, and said it wouldn’t levy the penalty on the company in the future.

But it’s not clear whether this decision will apply to other cannabis companies that may have been forced to pay similar penalties.

If this had gone through to a successful verdict in court, it would be a precedent, but this is a concession and an agreement (the IRS) will abate penalties to those who pay in cash and don’t have access to the payments system,” Allgreens’ attorney, Rachel Gillette, told The Denver Post. “Not applying (the penalty) to other businesses uniformly would be as ludicrous as having applied it in the first place.”

An IRS spokesperson declined to comment on either the settlement or its ramifications, the Post reported.