IRS said to be auditing Colorado marijuana businesses
Colorado pot businesses are increasingly coming under scrutiny from the Internal Revenue Service due to the industry's focus on cash, according to a report Tuesday from Marijuana Business Daily.
Marijuana businesses such as dispensaries are known to deal predominantly in cash due to continued U.S. banking restrictions that make it difficult for them to have bank accounts with federally chartered financial institutions. And those cannabis businesses with bank accounts sometimes have accounts closed once the bank learns about the marijuana-related activities.
Colorado is one of four states where adult recreational use of marijuana was legalized (Washington state, Oregon and Alaska also legalized it.)
An IRS spokesman told CNBC the agency "is prohibited by law from commenting on specific taxpayers."
According to MBD, the federal tax agency is interested in "probing the large cash transactions of dozens of Colorado marijuana companies, sparking uncertainty and unease among cannabis entrepreneurs." It also said the audits were focusing on the IRS Form 8300 — the form required for businesses reporting cash payments received of $10,000 or more.
The failure to file a Form 8300 can result in jail time and stiff financial penalties. The report quoted a business owner who didn't want to be identified but acknowledged being audited by the IRS for failure to file the form.
"So I'm looking at this with my tax attorney, and it's pretty serious," MBD quoted the business owner as saying. "They're not ruling out criminal charges. And, as a matter of fact, I know a couple of the audits have come from the fraud division of the IRS."
Overall, the report said "at least 30" marijuana businesses in Colorado have been audited recently. There are more than 500 pot dispensaries operating in Colorado and the publication estimates current year revenues at pot shops will exceed $400 million.
Click here to read the full story in Marijuana Business Daily.