January 18 directive from Michigan Department of Treasury demands patients pay 6% tax on all patient-caregiver transactions; with no new change in law to spark this issue, why now?
by Rick Thompson/January 25, 2018
FLINT– Michigan medical marijuana patients are 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 ADMINISTRATIVE 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 it’s 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 comes without any associated change in MMMA language or court result, leaving the state’s 300,000 patients questioning the logic and the timing of the 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.”
Caregivers are prevented from selling their goods through the state’s new dispensary system. Patients purchasing directly from a caregiver was a tax-free transaction for the first eight years of the MMMA, but now the definition of what is medicine and what is not seems to have morphed into a new phase which conveniently allows the state to make people pay for medicinal products.
“Michigan doesn’t tax medicine and we shouldn’t tax medical cannabis,” said Jeff Irwin, candidate for State Senate and a former House Representative, “especially when it is a critical tool in the fight against opioid abuse.”
In establishing the legitimacy of taxing cannabis the Treasury Bulletin identifies marijuana and marijuana-infused products as non-medicines because their use is not governed by a prescription written by a physician, but instead 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.
A letter opposing the change in how patients are treated by the state was sent from MINORML, the Michigan chapter of the National Organization for the Reform of Marijuana Laws, to all state legislators on Thursday, January 25.
In 2011 the Department of Treasury took a hands-off approach to cannabis sales and tax assessment. That statement was summarized in the MINORML letter.
In an April 2011 letter, Director of Bureau Tax Policy, Glenn R. White indicated that
“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.”
The MINORML letter cites the MMMA and identifies a new decision to issue a use tax on patients as a penalty which violates the 2008 voter-directed initiative. Attorneys and advocates agree.
“There is no basis or precedent for this ruling,” said Abel. “It seems entirely constructed from some type of wishful thinking on the part of the government.”
Brad Forrester is a Board member of the MINORML group from Cheboygan. When asked what impact this new policy would have on patients, 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.