This article was originally published on WeedWeek, and appears here with permission.
A California dispensary that appealed an $11M tax bill by questioning the constitutionality of industry-hated Internal Revenue Code Section 280E should have raised those constitutional concerns in Tax Court, lawyers representing the Internal Revenue Service told a federal judge.
Harborside Health Center took its fight to the U.S. Court of Appeals for the Ninth Circuit after a U.S. Tax Court ruled that the company owed the extra $11M after improperly claiming business deductions from 2007 to 2012. Because marijuana is listed as a Schedule I drug in the Controlled Substances Act, state-legal companies aren’t able to claim the same deductions as other traditional operations.
Government attorneys in the closely-watched case responded to Harborside’s appeal with a brief (read here) Wednesday arguing that Harborside should have raised its constitutional issues with Section 280E in Tax Court. Arguments that weren’t made in initial hearings are typically not heard on appeal, except in extreme cases, according to the brief. Because Harborside didn’t make those specific arguments in Tax Court, the government said they shouldn’t be considered on appeal.
The government argued the appeal should be dismissed regardless of that technicality, though.
“Even if these arguments were properly before this court, they lack merit and should be rejected,” read the response from the government.
Harborside, which operates multiple dispensaries in California, initially appealed the 2018 Tax Court …