IRS Auditing Harborside

[vta]

IRS auditing Oakland’s Harborside dispensary

By "Radical" Russ Belville

(Bay Citizen) Clean and well lighted, Harborside has exploded in popularity with 58,000 members and regular media coverage. The dispensary brings in around $20 million in revenue each year, likely the most in the Bay Area.

The IRS audits large companies on a regular basis, but in looking at Harborside, [it's CEO Steve] DeAngelo believes the agency will be raising questions about a section of tax code known as 280e. The section, which was aimed at nabbing drug kingpins, prohibits companies from deducting any expenses if they are “trafficking in controlled substances.”

“Our contention is that what were doing is legal and not trafficking, and it’s not appropriate to apply it to us,” said DeAngelo. “This is an industry-wide issue.”

Bob McEligot, a partner at the San Francisco tax firm Calegari & Morris, explained that normal companies just pay tax on their profits after deducting expenses such as payroll and rent. But if the IRS found a medical pot dispensary to be trafficking in controlled substances, then “they would be paying on their gross income with no deductions at all,” said McEligot.

The difference could be enormous. A company the size of Harborside could be paying taxes at a rate of about 35 percent without being allowed to deduct expenses.

Harborside believes it is in the clear as they have been transparent and careful about their deductions. They’re following the guidance of an article, “Medical Cannabis Dispensaries: Minimizing the Cost of IRC Section 280E,” which experts base partly on the case Californians Helping to Alleviate Medical Problems (CHAMP) Inc. v. Commissioner of Internal Revenue.

However, this is the federal IRS auditing a company selling federally illegal marijuana using the federal tax code. This is the IRS that successfully took down Al Capone’s federally illegal alcohol activities using federal tax code. I don’t at all find this coincidental to the recent announcement of a federal cannabis industries lobby – before Harborside and others can start spreading those lobbying dollars the feds are going to raid their piggy banks. You think an eighth is expensive now, just wait until dispensaries are paying back taxes and penalties and required to pay 35% taxes on gross receipts.

I think the IRS is too late, though. This weekend’s massive KushCon shows how much money there is in the marijuana industry. An entire generation in the West has grown up with legal medical marijuana. If the IRS succeeds in killing the most popular, highest profile, most professional dispensary in Oakland, sending people back to the streets and driving up prices, support for full legalization can only grow.

 

[Barn Owl]

Sounds like the Feds still want to stab medical marijuana.

 

[medicalgreen]

AWESOME!!!

If we live in a "gray" area, and some "privileged" people get to do things that others cannot, and many of us get arrested for doing what some are "sanctioned" to do, then I say, DOWN WITH THEM ALL!

Let Harborside Fall!

They are nothing more than a leading monopolist in a gray area.
Steve is no hero, and Harborside is no Collective. It's because of Harborside that Oakland goes after the little people. Oakland itself is nothing more than a drug sanctioned monopoly city for Medical Cannabis. We need to decentralize, not make bigger and badder dispensaries.

Harborside is in the process of opening up at least two dispensaries in every state that had medical marijuana, from what I hear through the grapevine. I hope this puts a nasty dent in their plans.

If Steve isn't stopped, he could potentially lock up and monopolize every medical marijuana state in the US.

Personally, I don't think anyone should be on the "inside" when plenty of us on the "outside" are still getting arrested for doing what we should be able to legally do. Until things are evened out, I think all the dispensaries should be shut down. Dispensaries are illegal anyways, and collectives are harassed when they don't pay unnecessary taxes. So, ultimately, the government is locking everyone into the "tax bracket" when we aren't even supposed to be paying taxes on cannabis. Steve is helping the ploy to set medical cannabis up for complete government regulation and taxation.

FUCK THE TAXES, FUCK THE FEDS, and FUCK THE MONOPOLISTS!

 

[HippyJohnny]

Keeping it grey is the absolute thing that it appears the feds seem to be o.k with.

In the grey:
Fines
Jails
Drug testing
Illegal searches
Probation fees
Task Forces
Property Seizures
Black market
Recommendation Card fees
Licences and business fees
and now Taxes.

It looks like the market is adjusting to keep it absolutely the most profitable.

Looks like the Dutch model to me , dressed up with different words, same result.

The IRS just wants a bigger cut.


To hell with the war on people that think.

 

[Barn Owl]

AWESOME!!!

FUCK THE TAXES, FUCK THE FEDS, and FUCK THE MONOPOLISTS!

And fuck drug dealers who like profitable drug laws.

 

[BiG H3rB Tr3E]

Harborside is in the process of opening up at least two dispensaries in every state that had medical marijuana, from what I hear through the grapevine. I hope this puts a nasty dent in their plans.

If Steve isn't stopped, he could potentially lock up and monopolize every medical marijuana state in the US.

nigga please. 1 guy locking down the entire med community?? he cant even lock down california. get a fucking grip and wipe that shit taste out of your mouth. envy is a very ugly color....

 

[grow nerd]

Not to worry, I'm sure Harborside is "deducting" in other ways i.e., paying their landscapers (who happens to be close family cousins) and part-time massage therapists (who also happens to be close in-laws) the maximum 6-figure salary, etc. to make sure that they funnel their profits through alternate channels.

You think an eighth is expensive now, just wait until dispensaries are paying back taxes and penalties and required to pay 35% taxes on gross receipts.

Just means they'll have to stop leasing top-of-the-line Mercedes S-class/AMG's and flying first-class or chartered Gulfstreams for "business use" and funnel more profits through more/different channels, that's all.

Harborside is in the process of opening up at least two dispensaries in every state that had medical marijuana, from what I hear through the grapevine.

How else are they going to "write off" or get away the massive profits from the Oakland/San Jose locations as a "non-profit"? They do have the $150k/yr salaried part-time janitor (who also happens to be a close family relative/friend), but that can only do so much for the balance book!

 

[Aeroguerilla]

AWESOME!!!



FUCK THE TAXES, FUCK THE FEDS, and FUCK THE MONOPOLISTS!

fucking right dude. everyone needs to think like this shut them all the fuck down force everybody back underground where they should be in the first place

 

[!!!]

Just shows how much money we're dealing with in practice now. $20 million a year is kind of a big deal, and this article alone will get even more people fired up about the green rush.

I wonder if the hippies way-back-when ever thought money and capitalism will become a central part of the legalization movement and probably the only drive pushing it forward.

 

[HippyJohnny]

This one never did...

 

[mean mr.mustard]

Are you suggesting that greed is driving the legalization movement?

 

[Rednick]

http://www.youtube.com/watch?v=1N5p8IXzNdc&feature=related

 

[HippyJohnny]

Are you suggesting that greed is driving the legalization movement?

If you are asking me... I am just surprised that the finances seem to be what John Q Public responds to, and not the police state that prohibition has created.

It is what it is no suggestions needed.

 

[Aeroguerilla]

damn you mods are quick to clean shit up good work

 

[Frozenguy]

I think the IRS is too late, though. This weekend’s massive KushCon shows how much money there is in the marijuana industry. An entire generation in the West has grown up with legal medical marijuana.

Interesting article, thank you! And I couldn't agree with you more about the IRS being too late. Think of all the people born in the eighties or nineties. They are living in a society where cannabis is legal, viewed as medicine or even an ok recreational substance.

The IRS/fed is going to be fighting a whole new breed of people. Not the reefer madness products, but prop 215 products

 

[medicalgreen]

nigga please. 1 guy locking down the entire med community?? he cant even lock down california. get a fucking grip and wipe that shit taste out of your mouth. envy is a very ugly color....

Maybe you never heard about the case where Harborside got involved in keeping a dispensary from opening up in Hayward because it would have presented too much competition for them. That happened. So, I suppose you support that, huh?

 

[gingerale]

They want to test and cheat the system, huh? Isn't that what we're ALL doing? How many "medical" marijuana patients are actually smoking for recreational use?

Step up like Harborside? You mean, making a nice profit at the expense of always having to look nervously at the door, wondering if jackbooted thugs are going to bust their way through at any minute?

I'm GROWING A FUCKING PLANT. How is this wrong? It's not. The fact that it's illegal is a travesty. The fact that a businessman can make money producing and selling this legitimate product only at the risk of his life and liberty is bullshit. The only logical and correct solution to the marijuana "problem" is full legalization.

As always though, selfishness prevails. It's not just about money, though there is a lot of money tied up in prohibition that will instantaneously go poof when it's legalized. DEA, prisons, cops, etc. The Feds spend a LOT of money on the War On Drugs(tm), and most of it gets distributed to states, cities, and their police/sherriffs/etc. There are various other entities who stand to lose out from legalization, while others gain.

And that's what it really comes down to--a power shift. When marijuana is legalized, everyone who deals in marijuana (the PEOPLE) just gained power. They are no longer under the thumb of the government, are able to operate legitimately within the law, and thus have de facto gained power. None of the powers that be are interested in seeing such a big power shift to the people.

And in the marijuana community itself, you would think support for legalization would be unanimous, since it clearly benefits everyone. I too thought legalization was a sure thing, but that's because I too made the mistake of thinking everyone would vote in his own best interest. Instead, as Big Tree so eloquently put it, a lot of the minnows are afraid the pond is suddenly going to get a lot bigger, and they are gonna get "Left Behind" like that really shitty Christian movie. Funny how it's the minnows who are always accusing the big guys of being "greedy"...yet who is it that voted NO to correct a TRAVESTY just because it might rock the boat and upset their own bottom line?

When the market is basically forced underground by the law, and the sales network involves word of mouth from person to person, with strict legal limits on plant count etc, and a lot of shadiness required, the effect is, EVERYONE is forced to be a small timer regardless of ambitions. That is unless one is willing to live a risky life every day, and has assloads of money for the necessary legal protection money and bribes. So the pond is forcibly kept small and so are the fish. No matter how small of a minnow you are, you still have a shot at "being somebody" in the community.

The minnows' worst nightmare is that legalization will occur, because then the market is going to be transformed. It's going to correct itself fast. Things won't change instantaneously, but within 5 years, prices will have dropped substantially. There will be all kinds of commercial brands at the 7/11. Marijuana cigarettes. The market will be huge, but the poor minnows are left alone and forgotten. Their home grown herb is no longer that impressive compared against hundreds of acres of greenhouse herb, tended by armies of workers, and processed by warehouses of cold, unfeeling machinery that tirelessly stamp out pallets of marijuana products 24/7.

So what do the minnows do? They vote NO on proposition 19, and giggle with glee high-fiving each other when it fails. Great job torpedo'ing everyone else at your own expense, guys. But guess what? While you made short term gains (for both of us), you've gained nothing for yourself in the long term. In fact you've hurt yourself, in the same way anyone hurts himself when he makes decisions which fail to take into account what the future ACTUALLY holds, as opposed to what he naively or ignorantly wishes for.

Full legalization in one or more states is 5 years away, tops. The market IS going to blow up and be huge. Some little fish are going to grow up into sharks. People you used to be growing buddies with back in the day will become big names in the big cannabis industry. All the people on here complaining about how tough and expensive it is to make a living growing pot will be the first in the unemployment line. Others will follow, as their circumstances, abilities, and means dictate. The only people left will be those with enough wisdom, knowledge, and ambition to find a place for themselves in the new system, even if it's working for somebody else.

So make the best of the time you have remaining, minnows! History stands still for noone. Harborside won't fail. I won't fail. Best of luck in YOUR endeavors.

 

[gingerale]

Maybe you never heard about the case where Harborside got involved in keeping a dispensary from opening up in Hayward because it would have presented too much competition for them. That happened. So, I suppose you support that, huh?

That's what happens when you have a GRAY or BLACK MARKET. If it were fully legalized, how would "Harborside" stop anyone from doing ANYTHING?

Think, people.

 

[dagnabit]

looks like they want to dip their beaks...
this is a step in the right direction
when they realized prohibitionist gestapo tactics did not work with alcohol they reverted to the tax code for prosecution shortly thereafter the 21st amendment passed.
all to familiar.

 

[rick shaw]

IRS audits are serious,they often end in fines with interest or criminal penalties. I was audited in 2008 for the years I was working as an independent contractor. From 2002-2006 they found 4 thousand dollars total in disallowed deductions,I showed them a tax article that I was basing my calculations on,they laughed. Bottom line was small a penalty and 25% interest on what I owed. 4 thousand turned into 13 thousand with 1.5% interest. Unless they intended to cheat on taxes they will be fined heavily.