IRS: Marijuana cash transactions aren’t automatically suspicious

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Large cash transactions by marijuana businesses should not automatically be reported as suspicious, according to new IRS guidance.

The tax agency’s guidance is an apparent attempt to clarify the federal Bank Secrecy Act, which requires businesses – including banks – that receive $10,000 or more in cash to file Form 8300 within 15 days.

Those forms allow the filer to report such a transaction as “suspicious,” information later used by the IRS and the Financial Crimes Enforcement Network (FinCEN) to investigate possible criminal activity.

But marking a cash transaction from a legal cannabis business as suspicious “defensively” is “an abuse of that box,” IRS Special Counsel Charles Hall wrote in a Jan. 22 memo.

“If they are solely marking the box because of the industry (marijuana, for example) and for no other reason, this is not an appropriate use of the box,” Hall wrote.

Hall’s memo – released publicly on March 1 and first reported by Marijuana Moment – directly addressed many tax questions specifically related to cannabis businesses that, for now, must deal mostly in cash thanks to federal MJ prohibition.

In addition to the guidance about the suspicious-activity box, Hall clarified that related businesses under the same umbrella company – such as a cultivation operation and a retail store – don’t need to file Form 8300s for internal transactions.

U.S. Rep. Earl Blumenauer, an Oregon Democrat who has sponsored banking reform in Congress, said in a statement Tuesday that Hall’s memo is “the leadership we need from federal agencies.”

“This is a small but consequential and common-sense step forward in how our tax system treats state-legal cannabis businesses,” Blumenauer said, in part.