Medical marijuana bags. (Photo by: Justin Sullivan/Getty)
Medical marijuana bags. (Photo by: Justin Sullivan/Getty)

The Bay Area’s budding medical pot industry is facing a big tax bill. The IRS has ruled Oakland’s largest dispensary can not deduct business expenses.

In a letter last week, the IRS told Harborside Health Center that it can not deduct standard expenses like rent, payroll and health insurance … because it traffics drugs.

Harborside’s executive director Steve DeAngelo said the dispensary now owes the federal government $2.5 million in back taxes and penalties.

“This is not an effort on the part of the IRS to tax us,” DeAngelo said. “This is an effort on the part of the IRS to tax us out of existence”

DeAngelo said he’s received a flood of calls from concerned dispensary owners and medical cannabis patients.

“Because as goes Harborside,” said DeAngelo. “So does the rest of the movement.”

DeAngelo says he got the news the same day he made a final payment on a more than $1 million tax bill to the City of Oakland, which imposes its own tax on dispensaries. He says he’s working with state and local officials in challenging the ruling.

“This is not just about Harborside,” DeAngelo said. “If the IRS is successful in closing Harborside, then you’re going to see a very serious impact on local and state tax revenue.

Assembly-member Tom Ammiano and other state officials last month sent a letter(pdf) to Congress urging changes in the internal revenue code.

An IRS spokesman declined to comment on the matter.

  • Jay Obscura

    Call a spade a spade. Cowardice to do so results in bad reporting. What the IRS tax bill against medical components from Harborside Health Center really is…..let’s call it by its real name: “protection money”……hey, lady, you want to keep your eyesight and avoid being driven mad with nausea from your anti cancer drugs….no problemo, just pay the boys $2.5Million US dollars. The IRS has learned well from the Costa Nostra. Nothing has changed from the Prohibition days, except now it’s not alcohol, but cannabis.


Mina Kim

Mina Kim is evening anchor and reporter for KQED News and Friday host of Forum. Mina got hooked on public radio in 2004, during a brief fellowship with KQED's Pacific Time, which is no longer in production. She became KQED's general assignment reporter in 2010, health reporter for The California Report in 2012, and KQED News' anchor a year later. She was named Friday Forum host in 2014.

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