The Internal Revenue Service has backed away from a policy that penalized an unbanked marijuana business in Denver for paying taxes in cash, but the federal agency will not say if the approach applies industry-wide.
In a settlement with Denver-based Allgreens, a medical-marijuana dispensary that challenged the agency over its policy, the IRS said it would abate future penalties and will refund about $25,000 of fines the business was forced to pay despite having paid its federal employment withholding on time.
IRS rules require businesses to pay employee withholding electronically or face a 10 percent penalty for cash payments. Although the IRS allows for an abeyance in certain circumstances, it disagreed with Allgreens’ position that an inability to get banking services forced it to pay in cash.
The company filed a petition in U.S. Tax Court challenging the penalty, saying it was unfairly applied to a business that was otherwise compliant and paid the taxes in full and on time.
A spokeswoman for the IRS refused to comment on the settlement or its ramifications.
It remains unclear whether the IRS settlement will extend to other marijuana businesses that have been assessed the cash-payment penalty because they could not obtain banking services.
Allgreens’ attorney, Rachel Gillette, said it’s possible — even likely — other impacted marijuana businesses could benefit.