Medical Cannabis Seller Seeks Tax Refund, Challenges Drug Policy

A New Mexico-based medical marijuana distributor sued the IRS for a $2.76 million refund after it said the agency wrongfully interpreted drug policy to eliminate its tax deductions for costs of goods sold.

The tax code’s prohibition on deductions and credits for trading in controlled substances, IRC Section 280E, can’t apply to intrastate medical marijuana cultivation in New Mexico, where the practice is legal, New Mexico Top Organics Inc., doing business as Ultra Health, said. It asked the US Tax Court on Dec. 16 to toss its purported income tax deficiencies from 2017 to 2019, which the IRS determined ...