Washington state trying to collect back taxes on medical pot

The Seattle TimesJanuary 2, 2014 

The state is reminding medical-marijuana businesses they must pay taxes, and plans to collect back taxes from roughly 300 businesses that haven’t apparently paid any.

The Department of Revenue (DOR) expects to send letters Friday to dispensaries, “medible” makers and other businesses emphasizing that taxes apply to their transactions.

The department believes about 500 registered businesses are now paying taxes.

That number — after a more thorough search — represents a big increase over previous DOR reports. Spokeswoman Kim Schmanke said 102 businesses related to medical marijuana paid about $2.5 million in 2012 state and local taxes.

In a recent check, Schmanke said DOR identified about 800 total businesses statewide that should be paying taxes. It found 311 that didn’t appear to pay taxes.

Schmanke said that number was likely “not perfect.” Some entrepreneurs may be doing business under a different name than the one they’ve registered with the state for tax purposes.

The businesses are supposed to pay a retail sales tax on any transaction. The state tax is 6.5 percent, and local jurisdictions may add to that.

Companies must also pay a tax on their gross receipts, called the business-and-occupation (B&O) tax. That rate is lower than the retail rate, requiring most businesses to pay 47 cents on $100 of gross income, Schmanke said.

Some in the medical-marijuana community are confused about their tax obligations, she said. “That’s why it’s important to put out these letters directly to businesses,” she said.

DOR has been clear, she said, that retail and B&O taxes apply to these businesses whether they are a collective or a cooperative. Unlike prescription drugs, medical marijuana is not exempt from retail sales tax.

Schmanke could not estimate the amount of back taxes that might be owed the state, or the amount that the 500 compliant businesses were taxed this year.

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