HR 501 IHCommentsClose CommentsPermalink

113th CONGRESSCommentsClose CommentsPermalink

1st SessionCommentsClose CommentsPermalink

H. R. 501CommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 to provide for the taxation of marijuana, and for other purposes.CommentsClose CommentsPermalink

IN THE HOUSE OF REPRESENTATIVESCommentsClose CommentsPermalink

February 5, 2013CommentsClose CommentsPermalink

Mr. BLUMENAUER (for himself, Mr. POLIS, and Mr. COHEN) introduced the following bill; which was referred to the Committee on Ways and MeansCommentsClose CommentsPermalink

A BILLCommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 to provide for the taxation of marijuana, and for other purposes.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Marijuana Tax Equity Act of 2013’.CommentsClose CommentsPermalink

SEC. 2. TAXATION RELATING TO MARIJUANA.

(a) In General- Subtitle E of title I of the Internal Revenue Code of 1986 is amended by adding at the end the following new chapter:CommentsClose CommentsPermalink

‘CHAPTER 56--MARIJUANA

‘subchapter a. producer tax.

‘subchapter b. special provisions relating to marijuana enterprises.

‘subchapter c. penalties.

‘Subchapter A--Producer Tax

‘Sec. 5901. Imposition of tax.CommentsClose CommentsPermalink





‘Sec. 5902. Exemption from tax.CommentsClose CommentsPermalink





‘Sec. 5903. Special rules.CommentsClose CommentsPermalink





‘Sec. 5904. Definitions.CommentsClose CommentsPermalink

‘SEC. 5901. IMPOSITION OF TAX.

‘(a) Imposition of Tax- There is hereby imposed a tax on the sale of marijuana by the producer or importer thereof.CommentsClose CommentsPermalink





‘(b) Amount of Tax- The amount of the tax imposed by subsection (a) shall be 50 percent of the price for which so sold.CommentsClose CommentsPermalink

‘SEC. 5902. EXEMPTION FROM TAX.

‘(a) General Rule- Under regulations prescribed by the Secretary, no tax shall be imposed under this subchapter on the sale by the producer or importer of an article--CommentsClose CommentsPermalink





‘(1) for use by the purchaser for further production, or for resale by the purchaser to a second purchaser for use by such second purchaser in further production, orCommentsClose CommentsPermalink





‘(2) for export, or for resale by the purchaser to a second purchaser for export.CommentsClose CommentsPermalink





‘(b) Proof of Resale for Further Production; Proof of Export- Where an article has been sold free of tax under subsection (a)--CommentsClose CommentsPermalink





‘(1) for resale by the purchaser to a second purchaser for use by such second purchaser in further production, orCommentsClose CommentsPermalink





‘(2) for export, or for resale by the purchaser to a second purchaser for export,CommentsClose CommentsPermalink





subsection (a) shall cease to apply in respect of such sale of such article unless, within the 6-month period which begins on the date of the sale by the producer or importer (or, if earlier, on the date of shipment by the producer or importer), the producer or importer receives proof that the article has been exported or resold for use in further production.CommentsClose CommentsPermalink





‘(c) Producer or Importer Relieved From Liability in Certain Cases- In the case of any article sold free of tax under this section (other than a sale to which subsection (b) applies), if the producer or importer in good faith accepts a certification by the purchaser that the article will be used in accordance with the applicable provisions of law, no tax shall thereafter be imposed under this chapter in respect of such sale by such producer or importer.CommentsClose CommentsPermalink





‘(d) Export- For purposes of this section, the term ‘export’ includes shipment to a possession of the United States; and the term ‘exported’ includes shipped to a possession of the United States.CommentsClose CommentsPermalink





‘(e) Use in Further Production- An article shall be treated as sold for use in further production if such article is sold for use by the purchaser for further planting, cultivating, or harvesting.CommentsClose CommentsPermalink





‘(f) Further Producer Liable for Tax- For purposes of this chapter, a producer to whom an article is sold or resold free of tax under subsection (a)(1) for use by him in further production shall be treated as the producer of such article.CommentsClose CommentsPermalink

‘SEC. 5903. SPECIAL RULES.

‘(a) Definition of Price- For purposes of this chapter--CommentsClose CommentsPermalink





‘(1) CONTAINERS, PACKING AND TRANSPORTATION CHARGES- In determining, for the purposes of this chapter, the price for which an article is sold, there shall be included any charge for coverings and containers of whatever nature, and any charge incident to placing the article in condition packed ready for shipment, but there shall be excluded the amount of tax imposed by this chapter, whether or not stated as a separate charge. A transportation, delivery, insurance, installation, or other charge (not required by the foregoing sentence to be included) shall be excluded from the price only if the amount thereof is established to the satisfaction of the Secretary in accordance with regulations.CommentsClose CommentsPermalink





‘(2) CONSTRUCTIVE SALE PRICE-CommentsClose CommentsPermalink





‘(A) IN GENERAL- If an article is sold at retail, sold on consignment, or sold (otherwise than through an arm’s length transaction) at less than the fair market price, the tax under section 5901 shall be computed on the price for which such articles are sold, in the ordinary course of trade, by producers thereof, as determined by the Secretary. In the case of an article sold at retail, the computation under the preceding sentence shall be on whichever of the following prices is the lower:CommentsClose CommentsPermalink





‘(i) the price for which such article is sold, orCommentsClose CommentsPermalink





‘(ii) the highest price for which such articles are sold to manufacturers, in the ordinary course of trade, by producers thereof, as determined by the Secretary. This paragraph shall not apply if subparagraph (B) applies.CommentsClose CommentsPermalink





‘(B) SPECIAL RULE- If an article is sold at retail or to a retailer, and if--CommentsClose CommentsPermalink





‘(i) the producer or importer of such article regularly sells such articles at retail or to retailers, as the case may be,CommentsClose CommentsPermalink





‘(ii) the producer or importer of such article regularly sells such articles to one or more manufacturers in arm’s length transactions and he establishes that his prices in such cases are determined without regard to any tax benefit under this paragraph, andCommentsClose CommentsPermalink





‘(iii) the transaction is an arm’s length transaction,CommentsClose CommentsPermalink





the tax under this chapter shall (if based on the price for which the article is sold) be computed under subparagraph (C).CommentsClose CommentsPermalink





‘(C) PRICE FOR PURPOSES OF SPECIAL RULE- The price computed under this subparagraph is whichever of the following prices is the lower:CommentsClose CommentsPermalink





‘(i) the price for which such article is sold, orCommentsClose CommentsPermalink





‘(ii) the highest price for which such articles are sold by such producer, or importer to manufacturers.CommentsClose CommentsPermalink





‘(D) DEFINITION OF LOWEST PRICE- For purposes of subparagraphs (A) and (C), the lowest price shall be determined--CommentsClose CommentsPermalink





‘(i) without requiring that any given percentage of sales be made at that price, andCommentsClose CommentsPermalink





‘(ii) without including any fixed amount to which the purchaser has a right as a result of contractual arrangements existing at the time of the sale.CommentsClose CommentsPermalink





‘(E) Arm’s LENGTH-CommentsClose CommentsPermalink





‘(i) IN GENERAL- For purposes of this section, a sale is considered to be made under circumstances otherwise than at arm’s length if--CommentsClose CommentsPermalink





‘(I) the parties are members of the same controlled group, whether or not such control is actually exercised to influence the sale price, orCommentsClose CommentsPermalink





‘(II) the sale is made pursuant to special arrangements between a manufacturer and a purchaser.CommentsClose CommentsPermalink





‘(ii) CONTROLLED GROUPS-CommentsClose CommentsPermalink





‘(I) IN GENERAL- The term ‘controlled group’ has the meaning given to such term by subsection (a) of section 1563, except that ‘more than 50 percent’ shall be substituted for ‘at least 80 percent’ each place it appears in such subsection.CommentsClose CommentsPermalink





‘(II) CONTROLLED GROUPS WHICH INCLUDE NONINCORPORATED PERSONS- Under regulations prescribed by the Secretary, principles similar to the principles of subclause (I) shall apply to a group of persons under common control where 1 or more of such persons is not a corporation.CommentsClose CommentsPermalink





‘(3) PARTIAL PAYMENTS- In the case of--CommentsClose CommentsPermalink





‘(A) a contract for the sale of an article wherein it is provided that the price shall be paid by installments and title to the article sold does not pass until a future date notwithstanding partial payment by installments,CommentsClose CommentsPermalink





‘(B) a conditional sale, orCommentsClose CommentsPermalink





‘(C) a chattel mortgage arrangement wherein it is provided that the sales price shall be paid in installments,CommentsClose CommentsPermalink





there shall be paid upon each payment with respect to the article a percentage of such payment equal to the rate of tax in effect on the date such payment is due.CommentsClose CommentsPermalink





‘(4) SALES OF INSTALLMENT ACCOUNTS- If installment accounts, with respect to payments on which tax is being computed as provided in paragraph (3), are sold or otherwise disposed of, then paragraph (3) shall not apply with respect to any subsequent payments on such accounts (other than subsequent payments on returned accounts with respect to which credit or refund is allowable by reason of section 6416(b)(5)), but instead--CommentsClose CommentsPermalink





‘(A) there shall be paid an amount equal to the difference between--CommentsClose CommentsPermalink





‘(i) the tax previously paid on the payments on such installment accounts, andCommentsClose CommentsPermalink





‘(ii) the total tax which would be payable if such installment accounts had not been sold or otherwise disposed of (computed as provided in paragraph (3)); except thatCommentsClose CommentsPermalink





‘(B) if any such sale is pursuant to the order of, or subject to the approval of, a court of competent jurisdiction in a bankruptcy or insolvency proceeding, the amount computed under subparagraph (A) shall not exceed the sum of the amounts computed by multiplying--CommentsClose CommentsPermalink





‘(i) the proportionate share of the amount for which such accounts are sold which is allocable to each unpaid installment payment byCommentsClose CommentsPermalink





‘(ii) the rate of tax under this chapter in effect on the date such unpaid installment payment is or was due.CommentsClose CommentsPermalink





The sum of the amounts payable under this subsection and subsection (c) in respect of the sale of any article shall not exceed the total tax.CommentsClose CommentsPermalink





‘(b) Certain Uses Treated as Sales- Any producer of marijuana which uses such marijuana before it is sold shall be liable for the tax imposed by section 5901 in the same manner as if such marijuana were sold by such producer.CommentsClose CommentsPermalink





‘(c) Application of Tax in Case of Sales by Other Than Producer- In case any person acquires from the producer of marijuana, by operation of law or as a result of any transaction not taxable under section 5901, the right to sell such marijuana, the sale of such marijuana by such person shall be taxable under this chapter as if made by the producer, and such person shall be liable for the tax.CommentsClose CommentsPermalink

‘SEC. 5904. DEFINITIONS.

‘For purposes of this chapter--CommentsClose CommentsPermalink





‘(1) MARIJUANA- The term ‘marijuana’ has the meaning given such term by section 102(16) of the Controlled Substances Act (21 U.S.C. 802).CommentsClose CommentsPermalink





‘(2) MARIJUANA PRODUCT- The term ‘marijuana product’ means any article which contains marijuana, including an article which is a concentrate, an edible, a tincture, a marijuana-infused product, or a topical.CommentsClose CommentsPermalink





‘(3) PRODUCER- The term ‘producer’ means any person who plants, cultivates, harvests, or in any way facilitates the natural growth of, marijuana.CommentsClose CommentsPermalink





‘(4) MANUFACTURER- The term ‘manufacturer’ means a person who manufactures, compounds, converts, processes, prepares, or packages marijuana or marijuana products.CommentsClose CommentsPermalink





‘(5) IMPORTER- The term ‘importer’ means--CommentsClose CommentsPermalink





‘(A) any person in the United States to whom nontaxpaid marijuana products, or any processed marijuana, manufactured in a foreign country, Puerto Rico, the Virgin Islands, or a possession of the United States are shipped or consigned; andCommentsClose CommentsPermalink





‘(B) any person who smuggles or otherwise unlawfully brings marijuana or marijuana products into the United States.CommentsClose CommentsPermalink





‘(6) DISTRIBUTOR- The term ‘distributor’ means a person who distributes marijuana or marijuana products.CommentsClose CommentsPermalink





‘(7) RETAILER- The term ‘retailer’ means a person who sells marijuana or marijuana products to consumers.CommentsClose CommentsPermalink





‘(8) MARIJUANA ENTERPRISE- The term ‘marijuana enterprise’ means a producer, importer, manufacturer, distributor, retailer or any person who transports, stores, displays, or otherwise participates in any business activity that handles marijuana or marijuana products.CommentsClose CommentsPermalink

‘Subchapter B--Special Provisions Relating to Marijuana Enterprises

‘Sec. 5911. Occupational tax.CommentsClose CommentsPermalink





‘Sec. 5912. Application for permit.CommentsClose CommentsPermalink





‘Sec. 5913. Permit.CommentsClose CommentsPermalink





‘Sec. 5914. Inspection of books.CommentsClose CommentsPermalink

‘SEC. 5911. OCCUPATIONAL TAX.

‘(a) Imposition of Tax- There is hereby imposed a special tax to be paid by each person who is engaged in a marijuana enterprise.CommentsClose CommentsPermalink





‘(b) Amount of Tax- The amount of the tax imposed under subsection (a) shall be--CommentsClose CommentsPermalink





‘(1) $1,000 per year in the case of a producer, importer, or manufacturer, andCommentsClose CommentsPermalink





‘(2) $500 per year in the case of any person engaged in a marijuana enterprise who is not described in paragraph (1).CommentsClose CommentsPermalink

‘SEC. 5912. APPLICATION FOR PERMIT.

‘Every person, before commencing business as a marijuana enterprise, and at such other time as the Secretary shall by regulation prescribe, shall make application for the permit provided for in section 5913. The application shall be in such form as the Secretary shall prescribe and shall set forth, truthfully and accurately, the information called for on the form. Such application may be rejected and the permit denied if the Secretary, after notice and opportunity for hearing, finds that--CommentsClose CommentsPermalink





‘(1) the premises on which it is proposed to conduct the business are not adequate to protect the revenue,CommentsClose CommentsPermalink





‘(2) the activity proposed to be carried out at such premises does not meet such minimum capacity or activity requirements as the Secretary may prescribe, orCommentsClose CommentsPermalink





‘(3) such person (including, in the case of a corporation, any officer, director, or principal stockholder and, in the case of a partnership, a partner)--CommentsClose CommentsPermalink





‘(A) is, by reason of his business experience, financial standing, or trade connections or by reason of previous or current legal proceedings involving a felony violation of any other provision of Federal criminal law relating to marijuana or marijuana products, not likely to maintain operations in compliance with this chapter,CommentsClose CommentsPermalink





‘(B) has been convicted of a felony violation of any provision of Federal or State criminal law relating to marijuana or marijuana products, orCommentsClose CommentsPermalink





‘(C) has failed to disclose any material information required or made any material false statement in the application therefor.CommentsClose CommentsPermalink

‘SEC. 5913. PERMIT.

‘(a) Issuance- A person shall not engage in business as a marijuana enterprise without a permit to engage in such business. Such permit, conditioned upon compliance with this chapter and regulations issued thereunder, shall be issued in such form and in such manner as the Secretary shall by regulation prescribe. A new permit may be required at such other time as the Secretary shall by regulation prescribe.CommentsClose CommentsPermalink





‘(b) Suspension or Revocation-CommentsClose CommentsPermalink





‘(1) SHOW CAUSE HEARING- If the Secretary has reason to believe that any person holding a permit--CommentsClose CommentsPermalink





‘(A) has not in good faith complied with this chapter, or with any other provision of this title involving intent to defraud,CommentsClose CommentsPermalink





‘(B) has violated the conditions of such permit,CommentsClose CommentsPermalink





‘(C) has failed to disclose any material information required or made any material false statement in the application for such permit,CommentsClose CommentsPermalink





‘(D) has failed to maintain his premises in such manner as to protect the revenue,CommentsClose CommentsPermalink





‘(E) is, by reason of previous or current legal proceedings involving a felony violation of any other provision of Federal criminal law relating to marijuana, not likely to maintain operations in compliance with this chapter, orCommentsClose CommentsPermalink





‘(F) has been convicted of a felony violation of any provision of Federal or State criminal law relating to marijuana or marijuana products,CommentsClose CommentsPermalink





the Secretary shall issue an order, stating the facts charged, citing such person to show cause why his permit should not be suspended or revoked.CommentsClose CommentsPermalink





‘(2) ACTION FOLLOWING HEARING- If, after hearing, the Secretary finds that such person has not shown cause why his permit should not be suspended or revoked, such permit shall be suspended for such period as the Secretary deems proper or shall be revoked.CommentsClose CommentsPermalink





‘(c) Information Reporting- The Secretary may require--CommentsClose CommentsPermalink





‘(1) information reporting by any person issued a permit under this section, andCommentsClose CommentsPermalink





‘(2) information reporting by such other persons as the Secretary deems necessary to carry out this chapter.CommentsClose CommentsPermalink





‘(d) Inspection or Disclosure of Information- For rules relating to inspection and disclosure of returns and return information, see section 6103(o).CommentsClose CommentsPermalink

‘SEC. 5914. REGULATIONS.

‘The Secretary may issue such regulations or other guidance as the Secretary determines necessary or appropriate to carry out this chapter, including the filing of returns under this chapter in electronic format.CommentsClose CommentsPermalink

‘Subchapter C--Penalties

‘Sec. 5921. Civil penalties.CommentsClose CommentsPermalink





‘Sec. 5922. Criminal penalties.CommentsClose CommentsPermalink

‘SEC. 5921. CIVIL PENALTIES.

‘(a) Omitting Things Required or Doing Things Forbidden- Whoever omits, neglects, or refuses to comply with any duty imposed upon him by this chapter, or to do, or cause to be done, any of the things required by this chapter, or does anything prohibited by this chapter, shall in addition to any other penalty provided in this title, be liable to a penalty of $1,000, to be recovered, with costs of suit, in a civil action, except where a penalty under subsection (b) or (c) or under section 6651 or 6653 or part II of subchapter A of chapter 68 may be collected from such person by assessment.CommentsClose CommentsPermalink





‘(b) Exception- No penalty shall be imposed under subsection (a) if it is shown that there was a reasonable cause and that the taxpayer acted in good faith.CommentsClose CommentsPermalink





‘(c) Failure To Pay Tax- Whoever fails to pay any tax imposed by this chapter at the time prescribed by law or regulations, shall, in addition to any other penalty provided in this title, be liable to a penalty of 5 percent of the tax due but unpaid.CommentsClose CommentsPermalink





‘(d) Sale of Marijuana or Marijuana Products for Export-CommentsClose CommentsPermalink





‘(1) Every person who sells, relands, or receives within the jurisdiction of the United States any marijuana or marijuana products which have been labeled or shipped for exportation under this chapter,CommentsClose CommentsPermalink





‘(2) every person who sells or receives such relanded marijuana or marijuana products, andCommentsClose CommentsPermalink





‘(3) every person who aids or abets in such selling, relanding, or receiving,CommentsClose CommentsPermalink





shall, in addition to the tax and any other penalty provided in this title, be liable for a penalty equal to the greater of $1,000 or 5 times the amount of the tax imposed by this chapter. All marijuana and marijuana products relanded within the jurisdiction of the United States shall be forfeited to the United States and destroyed. All vessels, vehicles, and aircraft used in such relanding or in removing such marijuana or marijuana products from the place where relanded, shall be forfeited to the United States.CommentsClose CommentsPermalink





‘(e) Applicability of Section 6665- The penalties imposed by subsections (b) and (c) shall be assessed, collected, and paid in the same manner as taxes, as provided in section 6665(a).CommentsClose CommentsPermalink





‘(f) Cross References- For penalty for failure to make deposits or for overstatement of deposits, see section 6656.CommentsClose CommentsPermalink

‘SEC. 5922. CRIMINAL PENALTIES.

‘(a) Fraudulent Offenses- Whoever, with intent to defraud the United States--CommentsClose CommentsPermalink





‘(1) ENGAGING IN BUSINESS UNLAWFULLY- Engages in business as a marijuana enterprise without filing the application and obtaining the permit where required by this chapter or regulations thereunder,CommentsClose CommentsPermalink





‘(2) FAILING TO FURNISH INFORMATION OR FURNISHING FALSE INFORMATION- Fails to keep or make any record, return, report, or inventory, or keeps or makes any false or fraudulent record, return, report, or inventory, required by this chapter or regulations thereunder,CommentsClose CommentsPermalink





‘(3) REFUSING TO PAY OR EVADING TAX- Refuses to pay any tax imposed by this chapter, or attempts in any manner to evade or defeat the tax or the payment thereof,CommentsClose CommentsPermalink





‘(4) SALES AND TRANSFERS OF MARIJUANA OR MARIJUANA PRODUCTS UNLAWFULLY- Sells or otherwise transfers, contrary to this chapter or regulations thereunder, any marijuana or marijuana products subject to tax under this chapter, orCommentsClose CommentsPermalink





‘(5) TAXABLE EVENT AFTER TAX EXEMPTION- With intent to defraud the United States, purchases, receives, possesses, offers for sale, or sells or otherwise disposes of, any marijuana or marijuana product--CommentsClose CommentsPermalink





‘(A) upon which the tax has not been paid or determined in the manner and at the time prescribed by this chapter or regulations thereunder, orCommentsClose CommentsPermalink





‘(B) which, without payment of tax pursuant to section 5902, have been diverted from the applicable purpose or use specified in that section,CommentsClose CommentsPermalink





shall, for each such offense, be fined not more than $10,000, or imprisoned not more than 5 years, or both.CommentsClose CommentsPermalink





‘(b) Other Offenses- Whoever, otherwise than as provided in subsection (a), violates any provision of this chapter, or of regulations prescribed thereunder, shall, for each such offense, be fined not more than $1,000, or imprisoned not more than 1 year, or both.CommentsClose CommentsPermalink





‘(c) Liability to Tax- Any person who possesses marijuana or marijuana products in violation of subsection (a) shall be liable for a tax equal to the tax on such articles.’.CommentsClose CommentsPermalink





(b) Study- Not later than two years after the date of the enactment of this Act, and every five years thereafter, the Secretary of the Treasury shall--CommentsClose CommentsPermalink





(1) conduct a study concerning the characteristics of the marijuana industry, including the number of persons operating marijuana enterprises at each level (e.g., producers, distributors, manufacturers), the volume of sales, the amount of tax collected each year, the areas of evasion, andCommentsClose CommentsPermalink





(2) submit to Congress recommendations to improve the regulation of the industry and the administration of the related tax.CommentsClose CommentsPermalink





(c) Conforming Amendment- Section 6103(o)(1)(A) of such Code is amended by striking ‘and firearms’ and inserting ‘firearms, and marijuana’.CommentsClose CommentsPermalink





(d) Clerical Amendment- The table of chapters for subtitle E of title I of such Code is amended by adding at the end the following new chapter:CommentsClose CommentsPermalink

‘Chapter 56. Marijuana.’.

(e) Effective Date-CommentsClose CommentsPermalink





(1) IN GENERAL- The amendments made by this section shall apply to--CommentsClose CommentsPermalink





(A) applications for permits under section 5912 of the Internal Revenue Code of 1986 (as added by subsection (a)) after the date of the enactment of this Act, andCommentsClose CommentsPermalink





(B) sales after December 31, 2013.CommentsClose CommentsPermalink





(2) SPECIAL RULES FOR EXISTING BUSINESSES- In the case of any producer operating under a permit issued on or before the date of the enactment of this Act under State law, the requirements under section 5912 of such Code (as so added) shall apply beginning on the date that is 6 months after the date of the enactment of this Act.CommentsClose CommentsPermalink