As some of you may be aware by now, last Thursday, January 18, 2018, the Michigan Department of Treasury quietly issued a new policy directive stating that all transactions between a patient and the caregiver he or she is connected to through the MMMP registry, are subject to 6% Use Tax to be paid by the patient! That report is real and several Michigan NORML board members are aggressively seeking to rectify this horrifying change of policy.
First, we have coined this new tax, the PATIENT TAX, because it only applies to patients and we believe that terminology will resonate with the public. We are working with a large media outlet to produce an Op-Ed piece to help publicize this issue. We have reached out to our national partners for consultation and assistance, and we are steadfastly engaging legislators demanding that they act to correct this travesty.
Here’s what we know and how it could impact patients and caregivers
YES. On January 18, 2018, the Michigan Department of Treasury issued Revenue Administrative Bulletin 2018-2. (document attached) That document outlines new tax policy for cannabis businesses, patients and caregivers. One of the conclusions on this report states;…a qualifying patient that receives marihuana from a primary caregiver is liable for use tax at a rate of 6% of the “purchase price” of the marihuana. Use tax should be remitted and reported annually on the qualifying patient’s Michigan Individual Income Tax Return (Form MI-1040).
They make their intent clear by providing this example;
Example 2. Carrie is a caregiver under the MMMA. Carrie provides marihuana in exchange for $100. Carrie is not liable for sales tax on the $100 since sales by caregivers under the MMMA are a non-taxable service. However, Paul is liable for use tax based on the purchase price of the marihuana. Paul should report and remit $6 in use tax for the use and consumption of this property on line 23 of his Michigan Individual Income Tax Return (MI-1040).
NO. This administrative change is not retroactive.
MAYBE. This change is so new, nobody knows with any certainty exactly what it means just yet, but if this policy remains in place, then yes, patients would be required to remit a 6% use tax to the State when they file their annual income tax returns.
NO. Not directly according to this bulletin that also addresses a caregiver’s tax obligation. It states;
A registered primary caregiver under the MMMA “may receive compensation for costs associated with assisting a registered qualifying patient in the medical use of marihuana. Any such compensation does not constitute the sale of controlled substances.” Therefore, primary caregiver provision of marihuana and marihuana derived products in compliance with the MMMA is a non-taxable service and not subject to sales or use tax.
Please refer to the example above where Paul is a patient and Carrie is a caregiver.
You probably have more questions, but at this point, any answer we give would be purely speculation. Please be patient and be prepared to act when we issue an action alert.
Just so you know, we have offered a specific legislative solution to legislators who care about our issue and who are just as appalled by this travesty as we are. We are confident they will ultimately understand the urgent need to act and correct this gross miscarriage of tax authority. We are also discussing legal strategies in case this ends up going that far, but whatever happens, we won’t surrender on this issue and we’re going to need everybody’s help when the time to act arrives! Please be ready!
Brad Forrester
Michigan NORML Director of Social Media