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IRS infers pot shops should use money laundering if the want to pay with cash

IRS infers pot shops should use money laundering if the want to pay with cash

With the new and burgeoning marijuana industry growing at accelerating rates, business owners are finding a new barrier in trying to be legal and pay their taxes in a timely manner.  Since many banks refuse to open accounts for pot shops, even in states where the drug is now legal to sell and use, business owners are finding out that making cash payments to the Internal Revenue Service to pay for their tax obligations are being given two no-win scenarios.

Pay an extra 10% fee to the IRS for using cash, or, launder their money through a third party entity so they can submit a check to the government instead of handing the agency legal tender (cash).

A marijuana business in Colorado has filed a lawsuit against the Internal Revenue Service for assessing a penalty for paying taxes in cash.

The IRS charges a 10 percent penalty on cash payments for federal employee withholding taxes. But many marijuana businesses are forced to pay taxes in cash because of difficulty accessing banking services.

The IRS sent the company a letter with a copy of its internal policies, which say companies have two alternatives to pay electronically. Both methods required Allgreens to funnel the cash to a third party, who could then make the tax payment on its behalf.

“It’s the very definition of money laundering,” Gillette told The Denver Post. “It’s absurd. An alternative should not force a taxpayer to engage in a potentially unlawful activity under a federal statute.” – AP via Yahoo Finance

No Cash

One of the greatest dichotomies in America today is how the government imposes massive regulation on nearly all forms of commerce, and then creates even more regulation which them makes it extremely difficult for businesses to follow the original restrictions.  Since Federal law concerning marijuana has scared most financial institutions from accepting accounts from pot businesses, that same Federal entity that refuses to announce protections for banks who want to service these customers also prefers not to accept its own legal tender for tax payments, and then imposes a draconian penalty on those who want or need to use it.

Kenneth Schortgen Jr is a writer for,, and hosts the popular web blog, The Daily Economist. Ken can also be heard Friday evenings giving an weekly economic report on the Angel Clark radio show.



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