New Mexico Supreme Court Deliberates Tax-Free Medical Cannabis

The New Mexico Supreme Court has been petitioned to determine whether or not medical cannabis products in the state should be tax-exempt.

Full story after the jump.

New Mexico officials are asking the state’s Supreme Court to determine whether or not medical cannabis products are exempt from gross receipts tax, like prescription drugs, according to New Mexico Political Report. On Monday, the state Attorney General’s office filed a petition with the court on behalf of the state Taxation and Revenue Department asking for clarification on the issue.

The filing stems from a 2014 case when licensed medical cannabis producer Sacred Garden asked the tax department for a refund on the gross receipts tax the company paid that year. That request was denied by the agency but the state Court of Appeals ruled in favor of the cannabis company, deciding that medical cannabis qualifies for the same tax exemption as prescription drugs, the report says.

In January, the state Court of Appeals ruled that a doctor’s recommendation to use cannabis is essentially the same as a traditional prescription drug. The court also argued that when the Legislature was considering the medical cannabis law, state analysts did not consider tax revenues from medical cannabis sales and, therefore, intended it to be tax-deductible, according to the report.

Special Assistant Attorney General Cordelia Friedman argued in the petition that because federal law prevents physicians from writing cannabis prescriptions it does not fall under the same tax-exempt category as prescription drugs in the state. Friedman argues that the logic in the Appeals Court decision is flawed since neither those who drafted the bill, nor lawmakers, explicitly included tax exemption language in the measure.

“The term ‘prescription’ does not appear in the Act or the regulation promulgated to provide guidance for individuals wanting to obtain ‘registry identification cards’ to receive medical marijuana.” — Friedman in the petition, via New Mexico Political Report

Friedman also argues that there is “no discernible benefit to those in medical need when Sacred Garden receives its requested refund predicated on past sales where it undisputedly charged gross receipts tax to its customers with no obligation to refund it to those customers.”

Following the January Appeals Court ruling, several cannabis dispensaries in the state announced they would no longer charge taxes. If the Supreme Court sides with Sacred Garden, they would be forced to pay back about $24 million in tax revenues paid by the state’s medical cannabis producers.

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