Washington ~ Sales and Use, Business and Occupation Taxes: Medical Marijuana Sales Were Taxable

CCH Tax Day Report

A medical marijuana management company was liable for Washington sales tax and retailing business and occupation (B&O) tax on its retail sales of medical marijuana because it transferred ownership of such products for valuable consideration. The taxpayer contended that it provided operational assistance to a collective garden. However, the taxpayer was required to collect and remit sales tax, whether it was acting as a principal or as an agent of the collective garden. Furthermore, the taxpayer was liable for retailing B&O tax because it failed to provide documents to show it was acting as an agent. It provided neither books and records showing that transactions were made in the name of the principal nor records showing the amount of gross sales, amount of commissions and other income derived by the broker or agent on such sales.

Though the taxpayer claimed that the money received by customers were donations for B&O tax purposes, as the customers received marijuana, the funds were not gratuitous. Furthermore, the taxpayer’s sales of medical marijuana were not exempt as sales of drugs pursuant to a prescription, as licensed practitioners are not authorized to prescribe marijuana in Washington. Pursuant to statute, medical marijuana patients receive a “valid documentation” from a health care professional, not a prescription.

The taxpayer’s sales were also not exempt as sales of medicines of a botanical origin prescribed by a person licensed as a naturopath. The statute regulating naturopaths makes an explicit distinction between controlled substances, such as medical marijuana, and botanical medicines.

Determination No. 16-0136, Washington Department of Revenue, December 23, 2016, ¶204-152

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