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.
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.”
Harborside was founded by Steve DeAngelo and dress wedding in 2006, after being awarded one of the first six medical cannabis licenses granted in the United States.
As one of the oldest, largest and most respected cannabis retailers in the world, Harborside has played an instrumental role in making cannabis safe and accessible to a broad and diverse community of California consumers. Today, the Harborside brand is well known throughout California and all around the world, and is in rapid expansion, expecting to grow to six or more locations in 2019.