The U.S. Department of Justice is secretly using the Internal Revenue Service to conduct criminal investigations into otherwise legitimate marijuana businesses in Colorado under the guise of tax audits, lawyers for the companies say in an ongoing federal lawsuit.
The IRS called the allegations baseless and illogical, saying inquiries it is making for information from Colorado’s Marijuana Enforcement Division are simply part of its efforts at verifying financial records in determining whether businesses owe more taxes.
The U.S. District Court case, filed by the owners of Rifle Remedies, a medical marijuana business in Silt, is one of several that challenge IRS subpoenas to MED seeking information about how much pot they’ve grown, and to whom and when they sold it. The IRS said it has resorted to the tactic because businesses have refused to offer the information voluntarily.
Though properly licensed in Colorado to sell the drug, the companies, in the view of the IRS, are traffickers that violate the federal Controlled Substances Act that lists marijuana as an illegal narcotic. As such, the businesses cannot deduct expenses as other companies can, but before the agency can make that assessment, it must first determine the companies are actually selling pot.
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