IRS trawling state-run pot database to block Colorado marijuana companies from claiming tax deductions
Federal tax agents are trawling a Colorado database designed to track pot from seed to sale as a way of proving licensed marijuana businesses are illegally trafficking in the drug.
The tactic is the latest in the Internal Revenue Service’s efforts at ensuring the otherwise-legitimate businesses cannot claim federal tax deductions, the companies say. The tax code prevents businesses that traffic in illegal drugs from claiming deductions.
At least six businesses, most recently the owners of Rifle Remedies, a medical marijuana business in Silt, have separately filed petitions in U.S. District Court to quash IRS summonses for state records that show how much pot the companies have grown and sold over a number of years.
The businesses say the IRS is essentially conducting a criminal investigation that has nothing to do with taxes, an overreach of its authority.
The state’s Marijuana Enforcement Division uses a tracking system known as METRC to monitor the growth and movement of pot statewide. Each plant has a specific code attached to it and every batch of product is traced to the point of sale.