A hearing on whether paying taxes on marijuana sales will set weed owners up for federal prosecution has failed, leaving marijuana business owners and consumers up in the air.
Advocates for the legalization of marijuana were suing to halt state and local government from collecting certain taxes on those sales. Their argument was marijuana is still illegal under federal law. Federal law takes precedence over state law. Paying taxes on the sales would be admitting to breaking federal law.
Colorado Judge John Madden, Denver District Court, held an almost day long hearing on the matter. He eventually ruled there wasn’t enough evidence to show that tax collections needed to be stopped right away with an injunction. Madden further stated, “I can’t find that there’s immediate, irreparable injury based on the testimony today.”
The argument from the marijuana business owners and consumers was that taxes must be stopped because they violate the Fifth Amendment rights against self-incrimination. By paying the taxes on marijuana sales, the business owners and consumers acknowledge they are violating federal law.
The attorneys for the business owners argued, “These taxes are gift-wrapped open-and-shut federal prosecution.”
The judge asked “How can a party be able to receive a preliminary injunction that would assist in violating federal law?” In other words, if an injunction were given to the marijuana business owners, the injunction would help the owners cover up a federal crime.
Attorneys for the state argued “Getting rid of the taxes is not going to prevent the federal government from prosecuting.”
If marijuana business owners were to present testimony in court voicing their concern their tax payments are self-incriminating, their testimony would actually incriminate them. They would have to give testimony on information on their marijuana sales. They would be testifying they are breaking the federal law.
Adding to the Catch-22, if the government collects taxes on marijuana sales, would they essentially be collecting illegal money? Would this be a form of money laundering? The conflicting state and federal laws are certainly creating chaos and confusion.
Last year, the Colorado Court of Appeals (Coats v. Dish Network) ruled that since marijuana remains against federal law, employers can use that standard rather than state law as a rationale for banning off-the-job worker use, and are not bound by Colorado’s Lawful Activities Statute.
Colorado officials predicted tax revenue from pot sales to be $33.5 million in the first 6 months. To date, the revenue from pot taxes fall $21.5 million shy of that prediction.
Marijuana business owners are fearful the same Colorado Court of Appeals may rule against them as well and federal law would, once again, prevail. This is part of the same federal law that makes it illegal to sell marijuana prescriptions to medical patients at a pharmacy in Colorado.
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