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.

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.

Javier Martinez

Tax officials asks lawmakers to push back bill’s date for legal pot sales

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When it comes to legalizing cannabis for recreational use, those responsible for running state government have a warning for lawmakers: Not so fast. The proposed legislation calls for the state to begin licensing retailers as soon as January 2020. But the state Taxation and Revenue Department has told lawmakers the deadline is unfeasible and asked that they push it back to 2021. The change would shove further into the future the day when New Mexicans who are 21 and older could freely buy cannabis from retailers. And that’s if House Bill 356 even passes this year, which may be a long shot, as the 60-day legislative session is in its final month and some Democratic senators remain opposed.

2019 Legislative Session

Governor appoints two to lead tax agency, Department of Indian Affairs

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Gov. Michelle Lujan Grisham on Tuesday named Santa Fe County’s finance director as secretary-designate of the New Mexico Taxation and Revenue Department and appointed a member of Sandia Pueblo with a background in tribal law as head of the state Department of Indian Affairs. The Cabinet-level appointments of Stephanie Schardin Clarke to lead the tax agency and Lynn Trujillo to lead Indian Affairs leave the Democratic governor with two remaining Cabinet positions to fill — secretaries of the Department of Corrections and the Public Education Department. 

Lujan Grisham, who has made public education one of her top priorities, indicated Tuesday that an appointment for public education secretary could be coming soon. In the interim, Lt. Gov. Howie Morales, a former educator, is overseeing the department. Santa Fe County Finance Director Stephanie Schardin Clarke was appointed Tuesday as the new Cabinet secretary-designate of the state Taxation and Revenue Department. Among Schardin Clarke’s goals, the governor said, will be to make the tax agency’s Motor Vehicle Division more “responsible, accountable and customer friendly.”

NM Legislature

Gov. Martinez’s appointees in line to be confirmed may overwhelm process

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After a year of high-profile changes in Gov. Susana Martinez’s Cabinet, top officials from several of the most important departments in state government now await Senate confirmation hearings. But the secretaries of environment, finance and health are just of a few of the governor’s nearly 100 appointees on the agenda. With the long list, it is unclear how many appointees will even get a vote before the Senate adjourns March 18. New Mexico’s financial crisis will make confirmation hearings more difficult than usual. Staff members say the Senate Rules Committee only has enough money to conduct background checks on about half the appointees.

2016 Legislative Session

Republican driver’s license bill through first committee hearing

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The House Regulatory and Public Affairs passed, along party lines, a Republican driver’s license bill Thursday evening. Sponsors of HB 99, Reps. Andy Nuñez, R-Hatch and Paul Pacheco, R-Albuquerque, presented the bill and told the panel that this was their attempt at compromising on the multiple-yearlong issue of whether or not to issue driver’s licenses to undocumented immigrants. Nuñez said since 2010 he’s tried to repeal the state law that allows a person to get a driver’s license without legal documentation of citizenship. “Since then we made a lot of compromises,” Nuñez said.

Brad Odell

Top Tax and Rev attorney leaving department

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The top attorney for the state’s Taxation and Revenue Department recently resigned from the cabinet-level agency. Brad Odell, TRD’s chief legal counsel, “informed the department that he will be leaving to pursue a good opportunity with a large law firm,” according to Lorissa Abeyta, a legal assistant with the agency. NM Political Report confirmed Odell’s resignation through a public records request with TRD after Odell and department spokesman Ben Cloutier didn’t return phone calls and emails for two days earlier this week. Odell’s actions came under scrutiny in a preliminary investigation that concluded TRD Secretary Demesia Padilla may have abused her power by helping a business during a tax audit by her agency. Padilla’s actions, according to the report, may have led to retaliation against TRD employees and lost the state money.