Harborside, the pioneering Oakland, California-centered cannabis mega-dispensary, owes the U.S. Internal Revenue Service $11 million in back taxes, a U.S. tax court judge ruled last week.<\/p>\n
But in a very Harborside judo move, the publicly-traded cannabis company characterized the bill as a huge win \u2014 a bold stroke which isn\u2019t entirely wrong \u2014 and what\u2019s more, it\u2019s a bill that the company may never have to pay.<\/p>\n
Initially known as Harborside Health Center,\u00a0the dispensary was made internationally famous thanks largely to its charismatic, media-savvy and instantly recognizable co-founder,\u00a0Steve DeAngelo<\/a>. Harborside now operates locations in Oakland and in San Jose. Between 2007 and 2012, the dispensary operated like a normal business, deducting \u201cnormal\u201d business expenses on its federal tax returns.<\/p>\n Meanwhile \u2014 in addition to negative attention from the federal Justice Department, which tried to shut the operation down with an ultimately fruitless forfeiture suit \u2014 the dispensary sold an enormous amount of cannabis: $25 million worth in 2012 alone, according to its tax filings.<\/p>\n Problem is, neither Harborside nor any other cannabis business are considered \u201cnormal\u201d under a section of the federal tax code originally intended to punish 1980s-era cocaine kingpins.\u00a0Section 280E<\/a>\u00a0says businesses can\u2019t make deductions for \u201ctrade or business\u201d involving the \u201ctrafficking of controlled substances.\u201d Harborside did do that and the taxman took notice.<\/p>\n The IRS had initially hit Patients Mutual Assistance Collective Corporation, the legal entity that operated the two Harborside locations, with a staggering $36 million worth of back taxes and penalties, enough to sink almost any outfit.<\/p>\n Armed with probably the best legal counsel in the industry, Harborside appealed, and this ensued a yearslong court battle arguing whether\u00a0280E<\/a>\u00a0applied. Last year,\u00a0U.S. Tax Court Judge Mark V. Holmes ruled that it did<\/a>.<\/p>\n But, based on findings that Harborside was being honest when it believed 280E didn\u2019t apply and that it had been doing what it could to comply with the law since, on Oct. 17, Holmes\u00a0signed off<\/a>\u00a0on a series<\/a>\u00a0of stipulated settlements that would see the dispensary pay \u201conly\u201d $11 million in back taxes.<\/p>\n $11 million is not $36 million, but $11 million is still $11 million. (We are good at math and good at business.) And The Harborside Group, which now owns two dispensaries in Oregon as well as grow operations in Salinas and Yolo County on top of the California flagships, is not exactly flush: Now publicly traded on the CSE, an alternative stock exchange based in Toronto,\u00a0Harborside reported<\/a>\u00a0about $7 million in sales (after cost of goods was calculated) to $13 million in expenses, not counting the expected tax bill.<\/p>\n But in a press release Monday<\/a>, both Andrew Berman, Harborside\u2019s current CEO, and DeAngelo, pointed out that Holmes and the tax court did recognize that cannabis dispensaries can take some deductions in cost of goods sold \u2014 a very important point in a commodity-based business like selling weed \u00a0\u2014 \u00a0and the dispensary had already budgeted exactly that large of a tax hit in its current financial statements. What\u2019s more, Harborside appears to be banking on never having to pay, ever.<\/p>\n Harborside \u201cfully intends to appeal this ruling to the Ninth Circuit Court of Appeals,\u201d the company told its investors in its most recent financial statement. Such an appeal, the business hopes, will modify or reduce Harborside\u2019s current bill, \u201cand in the future, eliminat[e] it for every other state legal cannabis business in the United States,\u201d DeAngelo said, according to the press release. \u201cThe issues at stake are of importance to the entire cannabis industry.\u201d<\/p>\n (And it appears that while the appeal is ongoing, a process that could take years, the dispensary doesn\u2019t have to pay anyway.)<\/p>\n This doesn\u2019t make surviving in the weed world in 2019 any easier. Harborside went public on the Canadian Securities Exchange, an \u201calternative stock exchange\u201d located in Toronto, where cannabis is legal on the national level (a thing that the United States hasn\u2019t quite figured out yet) in mid-2018. Life as a publicly traded company hasn\u2019t quite been kind: after trading in the $4-$5 range, shares of HBOR were going for $1.34 during trading on Thursday,\u00a0according to the most recent figures<\/a>, and some recent acquisitions were canceled.<\/p>\n Harborside\u2019s fate and the fate of its tax bill are not entirely in its own hands: it and other businesses have been steadily lobbying Congress to modify 280E to allow marijuana businesses following state law to make standard deductions \u2014 or, failing that, to get Congress to remove cannabis from the Controlled Substances Act, at which point 280E would no longer apply.<\/p>\n Will that happen? If so, when? Nobody can say. Nancy Pelosi\u2019s Democratic-controlled House of Representatives hasn\u2019t proven very willing to call marijuana reform bills for hearings, let alone pass them, which doesn\u2019t really matter as Mitch McConnell\u2019s Senate is unlikely to approve them no matter what the House does. But it\u2019s not hyperbole to state that as Harborside goes, so goes cannabis \u2014and so far, the dispensary has fended off worse challenges than this.<\/p>\n TELL US,<\/strong>\u00a0have you ever had trouble with the IRS when it came to paying your taxes?<\/p>\n The post Judge Rules Harborside Owes Back Taxes<\/a> appeared first on Cannabis Now<\/a>.<\/p>\n
Harborside, the pioneering Oakland, California-centered cannabis mega-dispensary, owes the U.S. Internal Revenue Service $11 million in back taxes, a U.S. tax court judge ruled last week. But in a very Harborside judo move, the publicly-traded cannabis company characterized the bill as a huge win \u2014 a bold stroke which isn\u2019tContinue Reading<\/a><\/span><\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"false","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[4602,50,459,2355,2082,1843,2651,90,12747,1845,1032],"tags":[],"_links":{"self":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts\/39189"}],"collection":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/comments?post=39189"}],"version-history":[{"count":1,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts\/39189\/revisions"}],"predecessor-version":[{"id":39190,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/posts\/39189\/revisions\/39190"}],"wp:attachment":[{"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/media?parent=39189"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/categories?post=39189"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cannabiscultivatornews.com\/home\/index.php\/wp-json\/wp\/v2\/tags?post=39189"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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\nRead More: Judge Rules Harborside Owes Back Taxes<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"