Michigan Department of Treasury Demands Patients Pay 6% Use-Tax on ALL Patient-Caregiver TransactionsDue to a directive from the states treasury department on January 18th, Michigan medical marijuana patients are now expected to pay a 3% MMFLA tax and a 6% sales tax on purchases from dispensaries under Michigan’s new cannabis distribution program as required by law, but a reversal of policy from the Department of Treasury requires patients not using dispensaries to pay a 6% penalty, too, and that has the patient services community up in arms.
In Revenue Administration Bulletin 2018-2, issued January 18, the Department of Treasury has decided to re-interpret the MMMA language and reverse their previous position on the taxation of cannabis sales. Every time a patient purchases cannabis from their registered caregiver the patient must log the sale and self-report a 6% use tax on the transaction, per the new directive.
“The Michigan Department of Treasury is exceeding its authority by implementing a new “PATIENT TAX” that requires registered patients to pay a 6% use tax on medical cannabis purchased from their caregiver,” wrote Matthew Abel, founding partner of the law firm Cannabis Counsel PLC and the Executive Director of MINORML.
The policy change arrives without any connected change in MMMA language or court result, leaving the state’s 300,000 plus patients questioning the reasoning for the sudden policy change.
“This new tax structure puts significant additional legal burden on caregivers operating in an already murky area of law,” said attorney Bruce Leach. “It signals the state’s clear intent to make caregiving as difficult as possible while the state moves to eventually eliminate caregivers altogether in favor of the regulated commercial market. If the state is going to implement this tax system then it is only fair that caregivers be allowed to have their goods properly enter into the regulated market.”
Under MMMA, caregivers are prevented from selling their goods through the state’s new dispensary system. Previously, patients purchasing meds directly from a caregiver did so as a tax-free transaction under the MMMA. Now the definition of what is medicine and what is not seems to have mutated into a new phase which effectively allows the state to make people pay a tax for medicinal goods.
“Michigan doesn’t tax medicine and we shouldn’t tax medical cannabis,” said Jeff Irwin, current candidate running for State Senate and a former House Representative, “especially when it is a critical tool in the fight against opioid abuse.”
In their attempts to legitimize the taxing of medicinal cannabis the Treasury Bulletin distinguishes marijuana and marijuana-infused products as non-medicines because their use is not governed by a prescription written by a physician, but rather is derived from a ‘recommendation’ written by a physician. However, in denying the tax-exempt status of cannabis foods, their own Bulletin identifies cannabis products as medicinal in this statement:
“Marihuana-infused products are not eligible for this exemption because they are consumed for their medicinal value rather than for their taste or nutrition.”
This certainly has a lot of patients and caregivers scratching their heads.
MINORML, the Michigan chapter of the National Organization for the Reform of Marijuana Laws, sent a letter to every state legislator on January 25th, opposing the change in how patients are treated by the state.
The Department of Treasury took a hands-off approach to cannabis sales and tax assessment back in April of 2011, when Director of Bureau Tax Policy, Glenn White wrote; The MMA re-characterizes what otherwise might be a taxable sale of tangible personal property as a non-taxable caregiver service, and that The MMA does not authorize either a regulatory or enforcement role for the Department of Treasury.
MINORML references the MMMA and identifies the new decision to issue a use tax on patients as a penalty which violates the 2008 voter-directed initiative. Advocates and attorneys’ seem to be in agreement on the issue.
“There is no basis or precedent for this ruling,” said Mathew Abel. “It seems entirely constructed from some type of wishful thinking on the part of the government.”
When asked what impact this new policy would have on patients, MINORML board member Brad Forrester responded, “The patients who comply with this new policy will place themselves and their caregivers at a higher risk for arrest and prosecution, simply by identifying themselves. Patients and caregivers now face a brand new risk, arrest and prosecution for income tax evasion, and conversely by complying, they are forced to divulge personal information that is confidential under the Michigan Medical Marihuana Act, but not confidential on the open records of our tax system.”
“As a criminal defense lawyer who represents patients and their caregivers, I’m concerned that tax rules could be used by law enforcement as another tool to violate privacy rights and to prosecute those who are doing their best to follow the Medical Marihuana Act,” said Southwest Michigan attorney Daniel Grow, past Chair of the Marijuana Law Section of the State Bar Association.
Forrester echoed that sentiment. “I can only imagine how overzealous cops and prosecutors will leverage this new law to help them squeeze patients and caregivers for some kind of lopsided plea agreement,” he said.