Pubdate: Sat, 10 May 2014
Source: Seattle Times (WA)
Copyright: 2014 The Seattle Times Company
Contact:  http://seattletimes.nwsource.com/
Details: http://www.mapinc.org/media/409
Author: Gene Johnson, the Associated Press
Page: B1

SUIT SEEKS TO STOP STATE FROM TAXING POT

Medical-Marijuana Case May Apply to All Pot, Attorney Says

Illegal Under Federal Law

(AP) - A federal lawsuit is challenging Washington state's authority
to tax marijuana as long as marijuana remains illegal under federal
law.

The case arises from the state's attempt to collect sales taxes from a
medical-marijuana dispensary. Lawyer Douglas Hiatt, who filed the suit
late Thursday, said it also could throw a wrench in Washington's plans
for collecting taxes on recreational marijuana.

The author of Washington's recreational pot law, Alison Holcomb,
disagreed. She doesn't expect the lawsuit to get very far.

Hiatt is representing the dispensary's operator, Martin Nickerson, who
is simultaneously being prosecuted criminally for marijuana
distribution and targeted by the state Department of Revenue for not
collecting and remitting taxes on the pot he was allegedly
distributing. Nickerson can't pay the tax without incriminating
himself in the criminal case, in violation of his constitutional
rights, Hiatt argued.

Furthermore, the state, which says Nickerson owes more than $62,000,
has seized more than $800 from his bank account. Hiatt said it's
important to get an answer from a federal court about whether the
state took that money legally.

Hiatt opposed Washington's recreational-marijuana law and argues any
meaningful drug-law reform must come at the federal level.
Nevertheless, he said he doesn't want to "look like the guy spoiling
the party."

"I have no choice," Hiatt said. "I've got a client, he's got a
problem, and we've got to fix it. It's a way to get some clarity on
what's allowed."

The lawsuit asks the U.S. District Court in Seattle whether
Washington's decision to tax marijuana sales is in conflict with
marijuana's prohibition under federal law. If it is, the court could
bar the state from collecting such taxes.

But Holcomb said there's little danger of that. The state isn't
specifically taxing the marijuana at issue in Nickerson's case - it's
applying a general sales tax to marijuana-related transactions, she
argued.

That's an important difference, she said: If the state had imposed a
specific tax on medical marijuana, then Nickerson might be implicating
himself by paying it.

Instead, when collecting sales taxes on marijuana transactions and
turning that money over to the Revenue Department, dispensaries don't
have to identity for revenue officials what they sold - they just have
to turn over the money owed on the value of the transactions they
conducted, Holcomb said. For that reason, Nickerson wouldn't have been
implicating himself by turning over the taxes.

And if Nickerson was so concerned about it, she suggested, he could
have filed a letter along with his taxes insisting his payment was not
an admission of any illegal activity.

"The bottom line is, he should have been paying his sales taxes along
the way," she said.

Hiatt dismissed that analysis. He said the Revenue Department has sent
letters to Nickerson saying he was selling marijuana and that he owed
taxes on the pot he sold.

"They're assessing him based on the amount of marijuana they think he
has sold," Hiatt said. "They're not applying a general sales tax to a
business; they're saying, 'We're applying this tax to you because
you're selling marijuana.' We're not talking about squirt guns."

The lawsuit also challenges a change made to the state's
medical-marijuana law in 2011, which expressly allowed cities and
counties to adopt zoning requirements, business-license requirements
and to collect business taxes from marijuana-related operations. It
argues that allows the jurisdictions to regulate a substance that's
illegal under federal law, in conflict with the Controlled Substances
Act.

The Revenue Department, which says Nickerson owes more than $62,000,
has repeatedly warned medical marijuana dispensaries that they're
required to pay regular sales and business taxes. Neither the
department nor the state Attorney General's Office immediately
responded to inquiries seeking comment on the lawsuit.
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