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The IRS Is Using Seed-to-Sale Tracking Systems to Stop Canna-Businesses from Claiming Tax Deductions

At least six marijuana providers in Colorado have filed court petitions to stop the IRS from accessing the state’s marijuana data.

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Summonses from the Internal Revenue Service have given federal tax agents access to Colorado’s seed-to-sale cannabis tracking system, and the businesses responsible for those plants are not pleased.

According to the Denver Post, the IRS has been sifting through the state’s marijuana database in an effort to ensure that Colorado’s ganjapreneurs aren’t claiming deductions on profits made from what is still a federally scheduled narcotic.

Without the tracking data, the IRS would have to rely on canna-businesses admitting that they’re breaking federal law to deny deductions, understandably, that’s not likely to happen.

Almost immediately after the IRS got their hands on the data, Colorado’s cannabis companies started filing petitions in U.S. District Court to kill the summonses and protect their information. At least six cannabis companies have filed petitions, including Silt, Colorado medical marijuana provider Rifle Remedies.

“The IRS wants a situation where on the one hand, a person will not be prosecuted for violating the Controlled Substance Act when selling state-legal marijuana, but, on the other hand, will have their business deductions denied … for violating the same law for which the taxpayer will not be prosecuted,” Rifle Remedies’ court motion says. “This is an Alice in Wonderland approach …”

A similar appeal from Aurora, CO based The Green Solution that sought to keep the IRS out of their records was denied by judges in the Tenth Circuit Court earlier this month.

If Rifle Remedies and the other protesting companies can succeed this time though, the IRS will be forced to find another way to prove Colorado’s canna-businesses are breaking federal law before denying further deductions.