Pubdate: Mon, 29 Sep 2014
Source: National Post (Canada)
Copyright: 2014 Canwest Publishing Inc.
Contact: http://drugsense.org/url/wEtbT4yU
Website: http://www.nationalpost.com/
Details: http://www.mapinc.org/media/286
Author: Tom Blackwell
Page: A1

MEDICAL MARIJUANA: DON'T FORGET THE GST

Pot subject to federal tax, judge rules

Sales of medical marijuana are subject to federal sales tax even when
they fall into a largely unregulated grey area, a judge has just ruled
in a case that underscores the legal haziness around pot in Canada.

B.C.'s Gerry Hedges earned as much as $114,000 a year selling a strain
of pot he named Po-Chi - after his dog - to a Vancouver "compassion
club" for medical-marijuana users. Though the police once raided his
operation on B.C.'s Gabriola island and the Harper government has
generally discouraged marijuana use, the federal tax department
insisted he charge GST on the shipments.

Mr. Hedges refused, arguing his pot was exempt from sales tax because
it is akin to a prescription drug.

But tax-court Justice Campbell Miller has ruled that pot is indeed
subject to GST, after dissecting the status of a substance that
federal law both criminally sanctions and, sometimes, treats as medicine.

He concluded it is more like an over-the-counter drug, for tax
purposes, than a prescription medication.

The judge complained, however, that legislation on drugs and GST has
"twisted itself out of shape," and needs to more clearly state when
levies should be charged on dried marijuana.

"There is understandable confusion in the industry on this point,"
said Judge Miller. "I cannot =C2=85 say with a great deal of enthusiasm
that I have clarified the legislation itself: there remain gaps and
inconsistencies."

Mr. Hedges was not available to talk about the case, and a spokesman
for the Revenue Agency declined to comment as the decision might still
be appealed. He also said there is no way to determine how much, if
any, GST the government takes in on marijuana sales.

Hillary Black, founder of the B.C. Compassion Club that bought Mr.
Hedges' product, said she had been advised not to comment on the case
while an appeal is still possible. The whole tax dispute unfolds
against the backdrop of an even greyer area in the fast-evolving
medical-marijuana universe - pot-dispensing operations like Ms. Black's.

Under old federal laws, patients had to first get a certificate from a
doctor saying they qualified to use pot medicinally, then a Health
Canada permit. Once approved, they could either grow it themselves or
buy from the government.

The rules were changed last year, now requiring people to obtain a
prescription from a physician, then purchase marijuana from one of a
number of government-licensed suppliers.

Compassion clubs, or dispensaries, work largely outside that
system.

The club that bought from Mr. Hedges - Canada's first - requires
members to obtain a certificate - from a doctor, dentist, naturopath,
Chinese medicine practitioner or other health professional - saying
the person suffers from one of a number of eligible conditions.

Growers are chosen by the club after staff and some members sample and
approve their product, the different "brands" offered on a menu of
sorts.

Mr. Hedges had begun growing pot just to treat pain from a congenital
hip condition, before agreeing to ramp up production and supply the
club, generating sales of $86,000 to $114,000 between 2007 and 2009,
the ruling said. The police raid came in 2010.

Five club members who used Po-Chi to treat pain, nausea and other
complaints testified at the tax-court trial earlier this year, saying
it offered the kind of relief that prescription drugs had not. "As one
member put it, it allowed her to get past the pain and live a normal
life," said Justice Miller.

The Canada Revenue Agency said Mr. Hedges owed $14,968 for uncollected
GST, interest and penalties.

But at the trial, his lawyers argued that marijuana is "zero-rated" -
exempt from GST - under a section of the Excise Tax Act that gives a
pass to certain drugs that require a prescription or Health Canada
exemption.

Justice Campbell dismissed the argument.

"Po-chi, I find, is more akin to an over-the-counter drug than a drug
acquired by prescription: one has little or no government control,
versus significant government control."

Meanwhile, a pot product called "Pochi" is still available for sale at
the B.C. Compassion Club, according to its website.
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MAP posted-by: Matt