As Colorado marijuana providers come to terms with supplying adults 21 years of age or older with their daily ounce, inevitably they have occasional administrative brushes with a system they do not know well. Marijuana Business Daily reports another instance where the federal government (via the Internal Revenue Service) is causing problems for the marijuana industry. Specifically, the spat is over the administration’s Form 8300 governing reporting single cash receipts of over $10,000 within 15 days of the event.
The wording of the regulation is a little vague where it says ‘Generally, any person in a trade or business who receives more than $10,000 in cash in a single transaction or in related transactions must file Form 8300. A “person” includes an individual, a company, a corporation, a partnership, an association, a trust, or an estate’. To my mind, ‘General’ introduces the possibility of exceptions.
If we are to take what providers have been telling John Schroyer who wrote the Marijuana Business Daily article at face value, some Colorado marijuana companies have not concerned themselves about Form 8300 until now, and they have had no complaints from IRS on the matter either. This situation changed radically following a spate of audits about non-submission of the forms.
There are a number of theories regarding why this is happening now. We are aware of a Memorandum of Understanding the IRS and Financial Crimes Enforcement Network signed April 2015, in which the agencies agree to ‘examine non-financial trades or businesses for compliance with the requirements set forth in the BSA [Bank Secrecy Act] and its implementing regulations.’ Perhaps the IRS is simply probing for money laundering, but there could be more to it than that. We think the problem might have a lot to do with education and that individuals are likely not aware of the Form 8300 requirements. We spoke to a number of medical marijuana dispensaries whom were not aware of this requirement.
The Internal Revenue Service has considerable leeway in the questions that it asks on its mission to ensure fiscal compliance. One attorney representing clients facing Form 8300 audits expressed concern about questions such as ‘How many plants do you grow per year?’ and ‘How many times did you harvest them during the examination period?’ If nothing else, it appears the IRS is interested in learning the detail of the marijuana trade.
In our opinion this is not something marijuana dispensaries need necessarily overly concern themselves about, provided their tax affairs are otherwise legal and above board. Fines for innocent non-compliance are $100 per missed Form 8300 for the 2015 tax year, and then $250 per missed form for the 2016 tax year.
If the Form 8300 audits disclose money laundering, that could be another matter. The penalties are up to 20 years in prison and a half million-dollar fine per violation. This is something best avoided.