Pubdate: Wed, 27 Jan 2016
Source: Globe and Mail (Canada)
Copyright: 2016 The Globe and Mail Company
Contact:  http://www.theglobeandmail.com/
Details: http://www.mapinc.org/media/168
Author: Mike Hager
Page: S3

UNLICENSED POT SELLERS MUST STILL PAY TAX, COURT RULES

Canadians selling medical marijuana outside the licensed mail-order 
system must still watch out for the taxman, according to a Federal 
Court of Appeal ruling that reasserts Ottawa's right to collect sales 
taxes on any and all pot that is sold.

In a unanimous decision released Monday, judges dismissed an appeal 
by Gabriola Island grower Gerry Hedges to stop the clawback of almost 
$ 15,000 in GST for marijuana he sold over several years to the 
Vancouver-based B. C. Compassion Club Society, Canada's oldest dispensary.

Alistair Campbell, Mr. Hedges's tax lawyer, said the case centred on 
whether marijuana should be treated like a prescription drug. Mr. 
Campbell argued in court that cannabis should be exempt from federal 
sales tax because members of the dispensary must go through a process 
akin to getting a prescription, unlike over-the-counter drugs that 
are subject to GST, such as extra-strength Tylenol.

The judges ruled that only drugs that are sold legally can be 
exempted from GST. However, they also agreed with previous rulings 
that legislation surrounding the taxation of medical marijuana has 
led to "uncertainty and confusion" and "needs work."

Under the current medical marijuana framework, patients buying pot 
from Health Canada's mail-order system must pay HST or GST on these 
products and then claim these levies as medical expenses. Some high- 
profile owners of illegal pot dispensaries have said they charge GST 
on all sales and remit those funds to the government, but it is 
unknown the extent to which this is common practice in the sector.

"Unless there's legislative change, what it means is that end users 
of marijuana for medical purposes will be paying GST," Mr. Campbell 
said. "The question for Parliament and public policy [ experts] is 
whether that is a proper approach to taxing the medication in view of 
the evolution of the law in this field."

Mr. Campbell said the Department of Finance could easily exempt all 
medical marijuana from sales taxes to make it more affordable for 
patients, adding "the GST Act is replete with those types of 
distinctions." Staff with the department and the CRA were unable to 
provide comment on the ruling Tuesday.

Hilary Black, founder of the dispensary that Mr. Hedges supplied, 
said Bedrocan - the licensed commercial grower she now works for - is 
starting an online petition asking federal Finance Minister Bill 
Morneau to exempt all medical cannabis purchased under Health 
Canada's system from sales taxes.

Ms. Black, who still acts as an adviser to the B. C. Compassion Club 
Society, said this issue provides an opportunity for Canada's 
industrial-scale growers and illegal dispensaries - often at 
loggerheads over competition for the same patients - to "create a 
unified front around an issue that is important for all of us."

"It's totally unjust and unethical and unfair for medical cannabis to 
be taxed like an over-the-counter medicine because it is a medical 
necessity," said Ms. Black, whose company is a subsidiary of Canada's 
largest legal cannabis producer, Canopy Growth Corp.

"And the spirit of our tax law is that medical necessities do not 
have sales taxes on them."

Ms. Black said the B. C. Compassion Club Society has funded the 
majority of Mr. Hedges's legal fees in this protracted battle against 
the CRA, which has totalled more than a quarter of a million dollars. 
In addition, the Crown was awarded costs in the latest ruling and the 
compassion club does not plan to appeal, she said.

Mr. Hedges, who did not want to be interviewed, started growing his 
own cannabis in 1988 to treat pain caused by a deformed hip and began 
selling to the Vancouver dispensary in 2007, racking up sales of $ 
110,732 that year alone, according to the ruling. In 2010, police 
raided his Gulf Island farm and Canada Revenue Agency assessed him 
for back taxes owed.

The federal tax agency has long been referred files after illegal 
grow operations are raided in B. C. to "assess people for unremitted 
GST in respect of projected illegal sales of marijuana," Mr. Campbell said.

"The CRA's long-standing position has always been that GST is 
applicable to all sales of cannabis, whether legal, illegal under [ 
government] authorizations to possess or otherwise," he said.
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MAP posted-by: Jay Bergstrom