Harborside Strikes Back, Wins Big In Tax Court

U.S. Tax Court Declines to Issue Penalties in Harborside 280E Case, Saving Industry Tens of Millions

CALIFORNIA: In a historic landmark decision that will save Harborside and the legal cannabis industry millions of dollars, the U.S. Tax Court has ruled that the California dispensary is not liable for accuracy-related 280E penalties. 280E is a tax code provision that denies all standard business deductions to businesses whose operations “consist” of activities that violate the Controlled Substances Act.

According to the Opinion issued by the Court, Harborside acted “reasonably and in good faith” when taking its tax positions for the years at issue. The Court cited Harborside’s timely filing of its tax returns and its maintenance of accurate financial records as a key strength, along with a persuasive argument from Harborside co-founder and Chairman Emeritus, Steve DeAngelo, that he made good-faith efforts to comply with the law, despite a lack of clear legal authority to guide medical marijuana dispensary taxpayers.

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The ruling comes just a few weeks after the same Court ruled that 280E itself does apply to Harborside — a ruling Harborside intends to appeal to the U.S. 9th Circuit Court of Appeals.

“We’re still working on knocking out 280E entirely, but at least for now we have established that cannabis businesses who operate in reasonable, good faith compliance with existing law will not suffer from additional unjust penalties,” said DeAngelo. “This ruling could save the legal cannabis industry tens of millions of dollars— dollars that ultimately come out of the pockets of cannabis consumers. What we are asking for is simple and fair: for the IRS to treat us like every other legal, tax paying business in the United States. Since the IRS has made it clear they are unwilling to do that on their own, Congress should step in and pass clear 280E reform legislation.”

The decision highlights Harborside’s historic role as an advocate and defender of the legal cannabis industry, and is just one of several victories it has scored since its founding in 2006. “Harborside never has, and never will, give up in its pursuit of justice for cannabis consumers and the legal industry that serves them,” said DeAngelo.

In 2016, the U.S. Department of Justice gave up on a years-long attempt to seize the properties where Harborside does business, dismissing a pending civil forfeiture action initiated 2012, when California’s four U.S. Attorneys mounted a statewide campaign to shutter California’s medical cannabis industry. The campaign had succeeded in closing 600 dispensaries— one third of the dispensaries in the state—but ended after Harborside won multiple legal victories in both state and federal courts.

“The penalties ruling strengthens Harborside’s financial position and helps clears the path for future industry growth,” said Andrew Berman, CEO of Harborside. “It’s a huge win for Harborside and the entire cannabis industry. We applaud the Court’s well-reasoned opinion, and appreciate the Court recognizing our commitment to compliance and operating in good faith.”

Oakland’s Medical Marijuana Dispensaries Move To Block An Open Market

CALIFORNIA: Oakland’s mayor and Cannabis Regulatory Commission want to remove the cap on medical marijuana dispensaries. The eight licensed medical marijuana dispensaries have hired a lobbyist to prevent that from happening

The eight licensed medical marijuana dispensaries in Oakland, California have banded together to limit the number of dispensaries in the city in a bid to consolidate their grip on the legal marijuana market.

A document obtained by BuzzFeed News shows that those eight dispensaries hired a lobbyist in July and last month announced that they would be forming the Oakland Dispensary Council to advocate on their behalf, raising questions about the extent of the cannabis industry’s growing spending power and political influence.

As legalization becomes more common, pot consumers are starting to pay more attention to the details of proposed regulatory schemes and who will profit from them. Last week, Ohioans voted overwhelmingly against a legalization initiative that would have given control of all commercial cultivation of cannabis to the same group of wealthy investors that bankrolled the campaign. Polls showed that a majority of voters in the Buckeye state support both recreational and medical marijuana, but 53% of voters felt this specific initiative was a “bad idea” because it created a “monopoly on growing marijuana.”

In The Bay Area, The Farm-To-Table And Legal Cannabis Movements Come Together

CALIFORNIA:  Transparency is a prominent force in today’s food industry. While farmers markets are hardly new, the attachment to organic, locally grown products have surfaced in other industries throughout San Francisco and Oakland–namely marijuana. These pot-friendly cities have seen a rise in cannabis delivery systems and sampling parties. In late February Flow Kana, “the world’s first farm-to-table cannabis delivery platform,” launched in San Francisco, foreshadowing the next generation of a once taboo trade. By the end of June the company will also serve Oakland and Berkeley.

Drawing inspiration from the farmer’s market model, Flow Kana partners with organic, sun-grown cannabis growers. Their platform enables users with medical marijuana cards to select desired strains and have 1/8 oz. of “connoisseur grade” marijuana delivered within thirty minutes for approximately $50. This model not only eliminates middlemen dispensaries, but also flips the economics of the industry. Farmers that were once at the mercy of dispensary rates can engage in a direct-trade business model similar to that of the direct-trade coffee movement.

Michael Steinmetz and Nick Smilgys, founders of Flow Kana, have received $500,000 in seed funding for the company. The two aim to change the cannabis industry by increasing the connection and transparency between farmers and consumers. Much of this revolves around what Steinmetz and Smilgys deem the “clean cannabis movement.”

Oakland’s Marijuana Scavenger Hunt Canceled, Thanks to Government Red Tape

CALIFORNIA:  The mysterious force behind the weed scavenger hunt announced for Saturday has revealed herself: she’s an entrepreneur from the East Coast, now head of a “tiny startup in Oakland.” And she has bad news: the authorities have stepped in, so there’s no more smartphone-powered weed giveaway on Saturday.

Flyers appearing in Oakland and 4×6 index cards dumped at Bay Area dispensaries last month advertised a treasure hunt, but with weed. For $35, seekers could join the “Bay Area Quest Hunt,” where those who found 50 “cards” hidden around the city would be rewarded with various amounts of medical cannabis: concentrates, edibles, flowers.

Though just a “soft launch,” the buzz was big, Dixon told SF Weekly late Thursday night, with bigger-than-expected ticket sales and 1,500 hits from a “less than $200 budget.” But alerted cops were pointed: you need a license for that kind of pot party, which is a clear instance of over-regulation, she said.

“The city is categorizing us as a business that is dispensing marijuana (much like a dispensary),” she wrote in an e-mail. “Bay Area Quest Hunt is NOT a cannabis business.