cannabis

NM Supreme Court tosses cannabis tax case

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The New Mexico Supreme Court effectively ended a years-long legal battle over medical cannabis and taxes. 

In an order filed on Wednesday morning, the court wrote that a previous decision from the New Mexico Court of Appeals that medical cannabis was exempt from gross receipts taxes prior to June 2021 should be upheld. 

“Having considered the petition, response, and briefs of the parties, the judgment of the Court is that the writ shall be quashed as improvidently granted,” the court wrote. 

In other words, the high court should have never accepted the case. 

The lawyer for Sacred Garden, the medical cannabis company that sparked the legal battle, did not respond to a request for comment. 

Duke Rodriguez, whose cannabis company Ultra Health joined the case last year, told NM Political Report on Wednesday that he was “thrilled” with the high court’s decision. 

“I think it’s a recognition that the state never had the legal authority to collect gross receipts tax on the sale of [medical] cannabis,” Rodriguez said. “This finally rights that wrong.”

The issue of gross receipts tax, which is often incorrectly referred to as a sales tax, and cannabis goes back several years, and spans two gubernatorial administrations, when medical cannabis producer Sacred Garden requested a refund for the gross receipts taxes it paid to the state. Sacred Garden’s reasoning was that medical cannabis was essentially the equivalent to other prescription drugs, which are exempt from gross receipts tax. Through an administrative hearing, the state’s Taxation and Revenue Department, under then-Gov. Susana Martinez, denied the request. Sacred Garden took the issue to the New Mexico Court of Appeals, which ultimately ruled that a recommendation for medical cannabis by a qualified medical professional was the same as a prescription for other types of medication. 

In early 2020, the department, which was by then under current Gov. Michelle Lujan Grisham, challenged the court of appeals decision and filed a petition with the state supreme court.

Alexandria Taylor

Funding for sexual assault programs passes during legislative session

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With relatively few reproductive healthcare bills before the 2022 legislative session, only one made it through intact. HB 32, sponsored by state Rep. Christine Trujillo, D-Albuquerque, which eliminates gross receipts tax, sometimes referred to as a sales tax, on feminine hygiene products, was grafted into HB 2, the general appropriation bill. The elimination of the GRT effectively, in layman’s terms, eliminates any sales tax to the products, which Trujillo sees in broader terms of civic engagement and political access. Trujillo said she wants to see poor and young girls to “start becoming more empowered and maybe this bill will help.”

“I want young girls to recognize that if they have that need for those necessities, they should not be shy about asking for them, and also start getting involved and engaged,” she told NM Political Report. The bill unanimously passed the House Health and Human Services Committee but the House Taxation and Revenue Committee tabled the bill.  The House Taxation and Revenue Committee later amended a tax changes bill, HB 163, sponsored by Christine Chandler, D-Albuquerque, to include tax deductions for gross receipts tax for feminine hygiene products.

News

Senate committee backs tax cuts supported by governor

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In a bipartisan vote, a Senate committee late Thursday endorsed an omnibus tax bill that would free most seniors from New Mexico’s income tax on Social Security benefits and would reduce the gross receipts tax rate by a quarter percent. While the bill still faces other hurdles in the final days of the legislative session, the 9-1 vote by the Senate Tax, Business and Transportation Committee marked a big win for Gov. Michelle Lujan Grisham, whose legislative priorities include exempting Social Security benefits from the state’s personal income tax and cutting the gross receipts tax rate. “The governor is committed to putting more money back in New Mexicans’ pockets, and we’re glad to see her priorities moving forward,” Nora Meyers Sackett, Lujan Grisham’s press secretary, wrote in an email after the vote. The bill also would extend the sunset on the state’s new solar market development income tax credit by eight years and increase the cap to $12 million from $8 million. “This is a significant package of tax changes and incentives, and combined, they will help the economy, help the environment and help reduce the tax burden on our residents and businesses,” said Jon Clark, deputy secretary of the New Mexico Economic Development Department.

Quick Reads

NM Supreme Court to hear oral arguments in medical cannabis tax case

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The New Mexico Supreme Court this week scheduled oral arguments for a case regarding medical cannabis sales and gross receipts taxes. 

Lawyers for the New Mexico Attorney General’s Office and two medical cannabis businesses will have an opportunity to make their respective arguments on Feb. 28 as to whether or not medical cannabis sales should have been exempt from gross receipts taxes prior to the state’s Cannabis Regulation Act that went into effect last June. 

The issue goes back several years to when medical cannabis producer Sacred Garden asked the state’s Taxation and Revenue Department for a refund of multiple years worth of gross receipts taxes the company paid. Initially, a hearing officer ruled in favor of the state, but that ruling was eventually reversed by the New Mexico Court of Appeals. In February 2020, the state took the issue to the state supreme court, where it has been pending since. In June 2021, medical cannabis company Ultra Health joined the case as an amicus curiae, or friend of the court. 

In previous court filings, Sacred Garden and Ultra Health argued that like prescription drugs, medical cannabis should have always been exempt from the state’s gross receipts tax, which is sometimes incorrectly referred to as a sales tax.

gross receipts tax

NM Tax and Revenue: Lawmakers didn’t intend for cannabis tax breaks

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The issue of whether taxes on medical cannabis sales in New Mexico should have been deductible prior to this year is one step closer to being heard by the state’s supreme court. 

The state Attorney General’s office filed a brief on Monday with the New Mexico Supreme Court on behalf of the New Mexico Taxation and Revenue Department that argued state lawmakers did not intend to allow gross receipts tax deductions on medical cannabis sales until this year. 

The issue stems from a request by medical cannabis producer Sacred Garden to deduct gross receipts taxes from its sales. The department denied the claim on the basis that medical cannabis is not prescribed like other medication. In New Mexico gross receipts taxes are deductible from prescription drugs and medical cannabis is not prescribed by a doctor, but instead recommended. A New Mexico Court of Appeals panel ruled in favor of Sacred Garden last January, writing that in terms of medical cannabis, the difference between a recommendation and prescription is negligible. TRD took the case to the state supreme court where it has been pending since last year.

gross receipts tax

Conflicting views on medical cannabis as a prescription

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Amid a pending New Mexico Supreme Court case concerning medical cannabis taxes, one state cabinet official seems to have a different view on whether medical cannabis recommendations from medical professionals are the same as traditional prescriptions, at least when it comes to COVID-19 vaccine priority. 

According to an email from January of this year, obtained by NM Political Report through a public records request, New Mexico Department of Health Secretary Tracie Collins believed that medical cannabis dispensary workers should be viewed similarly to pharmacists and that medical providers “prescribe medical cannabis” when it came to priority for COVID-19 vaccinations. 

This view differs greatly from an argument the state’s Taxation and Revenue Department has put forward in an ongoing legal case regarding gross receipts taxes and whether they should be allowed to be deducted from medical cannabis sales. 

Collins’ apparent view that medical cannabis recommendations are essentially the same as prescriptions came up in a series of emails between Gov. Michelle Lujan Grisham’s staff and Department of Health officials regarding where medical cannabis dispensary workers fall in terms of COVID-19 vaccination priority. The department’s deputy secretary Laura Parajon  replied to the email chain with Collins’ take. 

“Hi, sorry for yet another weighing in opinion. I consulted with Secretary Collins, and she also believes they are like pharmacists because providers do prescribe medical cannabis,” Parajon wrote. “I am adding her to the conversation.”

While the seemingly innocuous reply was in the context of vaccine priority, Collins’ reported opinion that medical professionals “prescribe” medical cannabis goes against the argument TRD has repeatedly put forth in a still pending legal case as a reason medical cannabis producers should not be allowed to deduct gross receipts taxes they paid to the state. DOH spokesman Jim Walton told NM Political Report that the context of the email conversation is important. 

“The question Deputy Secretary Parajon and Secretary Collins was asked was whether people who worked in a medical cannabis dispensary are considered to be within COVID-19 vaccination phase 1A,” Walton said.

gross receipts tax

It could be awhile before the NM Supreme Court decides to rule on cannabis tax case, if at all

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Medical cannabis producers in New Mexico will be on the hook for gross receipts taxes for the foreseeable future, or at least until the state Supreme Court decides whether it will weigh-in on the issue. 

Last week, a response filed by New Mexico cannabis producer Sacred Garden was the latest in a pending case between the producer and the state’s Taxation and Revenue Department (TRD). Earlier this month, the TRD filed a petition asking the high court to consider the case, with the hopes that it might overturn a previous state Court of Appeals decision. 

Santa Fe attorney Joe Lennihan, on behalf of Sacred Garden, argued that a review by the Supreme Court was unnecessary since the Court of Appeals already determined that medical cannabis should be viewed in a similar light as prescription drugs, which are exempt from gross receipts taxes. 

“Sales of medical marijuana are restricted to patients approved to use it and must do so under the care and supervision of a physician,” Lennihan wrote. 

Both TRD and Sacred Garden have repeatedly made their respective arguments in previous court filings and now both must wait to see if the state Supreme Court decides to weigh-in. 

For the most part, TRD has argued that since medical cannabis use is recommended, not prescribed, by a doctor, medical cannabis sales are subject to gross receipts taxes. Sacred Garden’s view on the matter is that because a 2019 update to the state medical cannabis law states that medical cannabis should be viewed in a similar light as any other prescription drug, medical cannabis producers should be exempt from the tax. The Court of Appeals ruled in favor of Sacred Garden, citing a lack of expected tax revenue in legislative financial impact reports. 

But in its request for the Supreme Court to consider the case, the TRD turned the legislative intent argument around and said that if the Legislature wanted to exempt medical cannabis from gross receipts taxes, it could have specified this by amending state tax laws. 

Gross receipts taxes, sometimes incorrectly referred to as sales taxes, are charged by the state and local municipalities for goods and services. Businesses often pass the tax along to the consumer, although they are not required to.

CARES Act

ABQ mayor hopes to use federal money to make up for lost tax revenue

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The City of Albuquerque received $150 million in federal aid this week, but the question still remains whether it can be used to keep the city operational. 

During a press briefing on Monday, Albuquerque Mayor Tim Keller announced some good news— that the city received a support check from the U.S. Treasury Department. Keller later told NM Political Report the city is awaiting further guidance on whether the city can use that money to make up for lost tax revenue that is needed to pay city employees and avoid layoffs and furloughs. Much of the city’s operations are funded through gross receipts taxes, Keller said. But, with many of the city’s businesses shut down and consumers largely staying at home, the state is facing a revenue gap of about $70 million between this and next fiscal years, Keller said. 

“The good news is the numbers line up almost exactly,” Keller said. “Tax revenue, we’re looking at being down $20 million this fiscal year and then $50 million the next fiscal year.”

Keller said the rest of the money would go to the daily costs of fighting the COVID-19 outbreak, with about $50 million left as a contingency reserve. 

“As long as this doesn’t go past May, the $150 million should cover us just right and if it goes longer than May, we’re not going to have enough,” Keller said. 

The money is part of the federal CARES Act, which was designed by Congress to distribute money to states and cities in need.

Quick Reads

Medical cannabis producers still on the hook for GRT, pending a state Supreme Court ruling

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Despite a decision by the New Mexico Court of Appeals, medical cannabis producers are still required to pay gross receipts taxes—at least for now. 

Last month the New Mexico Supreme Court filed notice that it received a petition from the state Taxation and Revenue Department asking for the high court to overturn a court of appeals ruling. That opinion, filed in January, stated that medical cannabis is exempt from gross receipt taxes. The notice from the high court that it received the petition from the state also included instructions to hold off on enforcing its decision. 

Days after the January decision, medical cannabis producers began notifying patients that they would not charge gross receipts taxes, which are often erroneously referred to as sales tax. State law requires many businesses to pay gross receipt taxes for goods produced or services provided. Those businesses often pass the tax on to consumers. 

The issue goes back to an attempt by medical cannabis producer Sacred Garden to get a refund from the gross receipt taxes it paid from 2011 through 2016.

Medical Cannabis Program

NM Supreme Court tasked with cannabis GRT issue

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Should medical cannabis producers continue to get a tax break? That’s the question the New Mexico Taxation and Revenue Department has asked the state’s high court. 

On behalf of TRD, the state’s Attorney General’s office filed a petition Monday with the New Mexico Supreme Court asking for clarification about whether medical cannabis is exempt from gross receipts tax, like prescription drugs. 

In 2014, New Mexico cannabis producer Sacred Garden asked the TRD for a refund on the gross receipts tax the company paid that year. That request was denied by TRD. But the state Court of Appeals agreed with the cannabis company and ruled that medical cannabis indeed qualifies for the same tax exemption as prescription drugs. In the state’s petition to the state Supreme Court, Special Assistant Attorney General Cordelia Friedman argued that because federal law prevents doctors from writing prescriptions for cannabis, it does not fall under the same tax exempt category as prescription drugs in New Mexico. 

“The term ‘prescription’ does not appear in the [Lynn and Erin Compassionate Use] Act or the regulation promulgated to provide guidance for individuals wanting to obtain ‘registry identification cards’ to receive medical marijuana,” Friedman wrote. 

The state Court of Appeals ruled in January that a recommendation from a doctor to use cannabis to alleviate symptoms of certain medical conditions is essentially the same as a prescription.