Insight

Legal Marijuana Enterprises and Federal Criminal Liability

If the trend of decriminalizing the use of small amounts of marijuana for recreational and/or medicinal purposes continues, marijuana may be widely available across the country within a matter of years.

Legal Marijuana
AR

Ambrosio Rodriguez

October 10, 2017 12:21 PM

Marijuana use is now legal, at least in some form, in 29 states. An increasing number of states are climbing on board to legalize marijuana as a way to generate much-needed revenue and to reduce the unnecessary prosecution of minor drug offenses.

If the trend of decriminalizing the use of small amounts of marijuana for recreational and/or medicinal purposes continues, marijuana may be widely available across the country within a matter of years.

Marijuana is still, however, classified as a Schedule I drug under federal law. Possession of marijuana is still a federal offense, regardless of any applicable state laws that may have decriminalized use in a particular state. Under President Obama’s watchful eye, the federal government all but formally agreed to refrain from prosecuting petty marijuana offenses in states where marijuana was legalized. It remains to be seen if this informal agreement will remain in place under the new administration.

Even though the federal government essentially agreed to divert its attention away from minor possession charges, it has still been able to undermine the growing state marijuana industries. A number of other laws pose threats to individuals who are involved in the marijuana industry. For example, a person could potentially face serious criminal charges for legally operating a small marijuana dispensary. Even though their actions comply with all pertinent state laws, the federal government can still arrest and charge them with incidental (and potentially unavoidable) crimes.

As criminal defense attorneys who specialize in drug crimes, it is important to be aware of the types of crimes clients may be forced to defend against. The scope of crimes that could potentially be charged is vast. What kind of federal crimes could a small marijuana dispensary owner commit? One of the most likely offenses is tax fraud. Tax fraud is the crime of intentionally attempting to evade the payment of taxes. This can be done in at least two ways: underreporting income and taking improper deductions.

While the marijuana dispensary operation may be by the books, it can be difficult to find a bank that will accept any money that is generated by the business. Many banks fear that they will be prosecuted for money laundering if they allow funds generated by a criminal activity to be processed through their institution. Dispensary owners are then forced to hide their proceeds and work off the books. This can result in serious tax issues. A cash business is ripe for abuse and fairly easy for the IRS to pick apart.

A small business owner who is not financially savvy could face serious criminal consequences for circumstances beyond his/her control.

Self-employed individuals are generally allowed to take certain business-related deductions on their tax returns. However, the IRS prohibits individuals who are engaged in criminal enterprises from making any business-related deductions. This means the dispensary owner who takes deductions for rent, utilities, supplies, salary, and other dispensary-related expenses would be breaking the law.

What kind of consequences could tax fraud have? The type of criminal penalties that may apply to a marijuana dispensary owner will depend on the specific circumstances of each case. The way the business is structured and the choices the legal business owner makes will generally dictate what kind of legal trouble they could find themselves in. If a business owner fails to file a return, pay taxes, or provide information, he or she could face up to one year in jail and/or fines of $100,000. If the business owner is accused of making fraudulent statements, he or she could face up to three years in a federal prison and/or fines of up to $250,000. If the business owner is accused of tax evasion, he or she could face up to five years in a federal prison and/or fines of up to $250,000.

The bottom line is that even though marijuana may be legal under state law, it is still considered a criminal enterprise under federal law. Owners of legitimate businesses (as far as the state is concerned) can face serious criminal consequences for just trying to make a living. This is true despite the existing “wink, wink, nudge, nudge” agreement between the federal government and states where marijuana is legal. This will not change until federal laws change to reflect the shifting culture and attitude toward marijuana enterprises. Criminal defense attorneys should take the initiative to brush up on their understanding of crimes that could be charged in these situations. The greater the scope of knowledge, the better we can serve our clients.

------------------------

Ambrosio Rodriguez is an attorney and founder of The Rodriguez Law Group, a leading criminal defense firm located in Los Angeles, California. Mr. Rodriguez is a graduate of top-ranked Georgetown University School of Law, is a former prosecutor, and has over 18 years’ experience. Call today for a free consultation.

Phone: 213-995-6767
Email: info@aerlawgroup.com

Related Articles

Evolving Marijuana Laws and the Workplace


by Tess P. Anglin

How can employers enforce statutes that differ from state to state?

Red image of a marijuana leaf

What Legalizing Recreational Marijuana Means for Indiana


by Rock Lee

What will marijuana legalization mean for business, past conviction, and beyond?

Legalizing Marijuana in Indiana

Employers Are Budding Heads on Marijuana in the Workplace


by M. Tae Phillips and Melanie C. Cormier

As employment lawyers, we receive many questions from employers navigating marijuana legalization. Below, we answer the top three most asked questions.

Statue of Liberty holding a marijuana joint

The Green Rush: Cannabis Is a Growing Industry


by Justin Smulison

Connecticut announced it will legalize high-THC cannabis for adult use on July 1, making it the 19th state to do so in the U.S. As of June 2021, 38 states and Puerto Rico have legalized cannabis for medical use.

Cannabis Legalized in Connecticut

In the News: New England


by Best Lawyers

A roundup of relevant news for listed lawyers in New England.

New England Legal News

Trending Articles

Announcing the 2023 The Best Lawyers in America Honorees


by Best Lawyers

Only the top 5.3% of all practicing lawyers in the U.S. were selected by their peers for inclusion in the 29th edition of The Best Lawyers in America®.

Gold strings and dots connecting to form US map

Announcing the 2022 Best Lawyers® in the United States


by Best Lawyers

The results include an elite field of top lawyers listed in the 28th Edition of The Best Lawyers in America® and in the 2nd Edition of Best Lawyers: Ones to Watch in America for 2022.

2022 Best Lawyers Listings for United States

2021 Best Lawyers: The Global Issue


by Best Lawyers

The 2021 Global Issue features top legal talent from the most recent editions of Best Lawyers and Best Lawyers: Ones to Watch worldwide.

2021 Best Lawyers: The Global Issue

The U.S. Best Lawyers Voting Season Is Open


by Best Lawyers

The voting season for the 31st edition of The Best Lawyers in America® and the 5th edition of Best Lawyers: Ones to Watch® in America is officially underway, and we are offering some helpful advice to this year’s voters.

Golden figures of people standing on blue surface connected by white lines

How To Find A Pro Bono Lawyer


by Best Lawyers

Best Lawyers dives into the vital role pro bono lawyers play in ensuring access to justice for all and the transformative impact they have on communities.

Hands joined around a table with phone, paper, pen and glasses

The Best Lawyers in Australia™ 2024 Launch


by Best Lawyers

Best Lawyers is excited to announce The Best Lawyers in Australia™ for 2023, including the top lawyers and law firms from Australia.

Australian Parliament beside water at sunset

How Palworld Is Testing the Limits of Nintendo’s Legal Power


by Gregory Sirico

Many are calling the new game Palworld “Pokémon GO with guns,” noting the games striking similarities. Experts speculate how Nintendo could take legal action.

Animated figures with guns stand on top of creatures

What the Courts Say About Recording in the Classroom


by Christina Henagen Peer and Peter Zawadski

Students and parents are increasingly asking to use audio devices to record what's being said in the classroom. But is it legal? A recent ruling offer gives the answer to a question confusing parents and administrators alike.

Is It Legal for Students to Record Teachers?

Inflation Escalation


by Ashley S. Wagner

Inflation and rising costs are at the forefront of everyone’s mind as we enter 2023. The current volatile market makes it more important than ever to understand the rent escalation clauses in current and future commercial lease agreements.

Suited figure in front of rising market and inflated balloon

The Upcycle Conundrum


by Karen Kreider Gaunt

Laudable or litigious? What you need to know about potential copyright and trademark infringement when repurposing products.

Repurposed Products and Copyright Infringemen

8 Different Types of Criminal Defenses in Law


by Best Lawyers

Learn about the different types of criminal defenses available in law, including innocence, self-defense, insanity and more. Protect your rights today.

Silver handcuffs laying on finger printed papers

Best Lawyers: Ones to Watch in America for 2023


by Best Lawyers

The third edition of Best Lawyers: Ones to Watch in America™ highlights the legal talent of lawyers who have been in practice less than 10 years.

Three arrows made of lines and dots on blue background

A Celebration of Excellence: The Best Lawyers in Canada 2024 Awards


by Best Lawyers

As we embark on the 18th edition of The Best Lawyers in Canada™, we are excited to highlight excellence and top legal talent across the country.

Abstract image of red and white Canada flag in triangles

Wage and Overtime Laws for Truck Drivers


by Greg Mansell

For truck drivers nationwide, underpayment and overtime violations are just the beginning of a long list of problems. Below we explore the wages you are entitled to but may not be receiving.

Truck Driver Wage and Overtime Laws in the US

Choosing a Title Company: What a Seller Should Expect


by Roy D. Oppenheim

When it comes to choosing a title company, how much power exactly does a seller have?

Choosing the Title Company As Seller

The 2024 Best Lawyers in Spain™


by Best Lawyers

Best Lawyers is honored to announce the 16th edition of The Best Lawyers in Spain™ and the third edition of Best Lawyers: Ones to Watch in Spain™ for 2024.

Tall buildings and rushing traffic against clouds and sun in sky