New Mexico cannabis producer seeks $583K tax refund

A medical cannabis producer has filed a lawsuit attempting to force the Department of Taxation and Revenue to comply with a year-old New Mexico Court of Appeals ruling that medical cannabis should be exempt from gross receipts tax like other medications.

R. Greenleaf Organics’ complaint, filed recently in state District Court, seeks a tax refund of $583,000 for taxes it paid in 2017.

The company cites a January 2020 ruling in which the state’s appellate court rejected the state Taxation and Revenue Department’s decision — in response to a formal tax protest filed by another cannabis producer — that medical cannabis did not qualify for exemption from being taxed because it was not technically prescribed.

In that case — which centered on producer Sacred Garden’s attempt to recoup taxes it had paid between 2011-16 — the Court of Appeals found cannabis was a medicine for tax purposes.

Retired state Court of Appeals Judge M. Monica Zamora wrote the unanimous opinion published Jan. 28, 2020, that the Lynn and Erin Compassionate Use Act, which authorizes the medical use of marijuana in New Mexico, clearly intended cannabis to be treated like other medications.

“The Compassionate Use Act intended to make medical marijuana accessible to those with debilitating medical conditions. … It is reasonably self evident that the deduction from gross receipts for prescription drugs was similarly intended to make medical treatment more accessible, by lessening the expense to those who require it,” Zamora wrote.

This is confirmed in part, the judge wrote, by the fact that the legislation’s financial impact statement never contemplated how taxes generated from the sale of medical cannabis would be handled. But the state Department of Taxation and Revenue didn’t accept that interpretation. It applied to the New Mexico Supreme Court for review of the opinion in March and has continued to collect gross receipts taxes from medical cannabis producers.

The Supreme Court has a choice. It can agree to review the opinion, perhaps affirming or overturning it, or decline to review the lower court’s ruling, in which case the 2020 opinion would stand.

But the state’s high court has decided to do nothing instead, Willie Ford, executive director of R. Greenleaf Organics, said Friday.

“It’s a bit of political dirty trick for the Supreme Court to put us in this position, back into a gray zone,” Ford said. “They haven’t even decided if they are going to hear the case or not. The state should have to return this money to the group that paid it erroneously.”

“I think the Supreme Court is not stepping in unless the governor wants it to,” Ford said. “And maybe the secretary of health could have that kind of pull. But this was not some controversial split decision. This came across as pretty cut and dried. So I’m assuming someone at some level called the Supreme Court and said, ‘Just sit on this.’ ”

“It just feels kind of manipulative by the administration,” he continued.

Ford said it’s his understanding that state agencies are supposed to comply with challenged court rulings even while appeals are pending.

Delaying the inevitable, Ford said, will only serve to put the state deeper in the hole if it ends up having to provide tax refunds for multiple years to multiple companies all at once.

“What was already a problem now is becoming a bigger problem,” Ford said, noting that R. Greenleaf Organics paid taxes on $20 million in revenue in 2020.

A spokesman for the state Taxation and Revenue Department did not respond to a reporter’s email asking if the agency had refunded any taxes paid on medical cannabis as a result of the ruling.

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