Avalara

Governor John Baldacci signed LD 1540 into law this weekend.  The law itself is sort of a catch-all, end-of term, grab-bag legislation.  Of course, there was some sales tax connection (or you wouldn't see it here).  This bill provides for medical marijuana (med-mar) to be subject to sales tax.

Click here to read sales tax law:

Naturally, Maine didn't come out and say plainly and clearly that medical marijuana is now taxable, instead the state bill drafters specifically exempted med-mar from the the list of medicines that are exempt from sales tax.   (Scroll down to Sec. 6. 36 MRSA §1760, sub-§5 to see.)  Did you get that?  You see, med-mar is taxable because it is on a list of things that are specifically not exempt. 

The social implications of Maine's decision are beyond the scope of this blog, the taxing issues are not. 

First, the law will introduce an entire new class of businesspeople to the sales tax world, as med-mar providers will need to collect tax on the sales they make.  The folks charged with enforcement will have to develop new ways to analyze the business operations of  med-mar providers.  We are guessing that there may not be a whole lot of market studies or analyses done in that particular, ahem, field of endeavour. 

Second, this type of decision makes the case perfectly clear that the states are broke:

"On an annual basis, tax revenue from dispensaries and caregivers together will top $100,000",  states Jerry Stanhope, an analyst from the Maine Revenue Service, in an interview with Capitol News Service of Maine.

It doesn't take a degree in rocket science, or hydroponics, to know that states that are broke when they are passing new laws to generate $100k.  If they are that broke, the states will be looking to enforce compliance in the sales tax realm as a source of ... revenue.  This means increased enforcement efforts directed at you, Maine vendors!

Finally, take a look at how the language in the law works.  The drafters chose to employ linguistic style which practically forces the reader to draw a diagram.  Unfortunately, this sort of opaque, confusing language style is common in the sales tax field.  The sales tax on pot may not be easy to remember due to the nature of the product, (unless you are a current patient...), but often laws that concern sales tax topics more mundane than this can be vague and counter-intuitive too.

So, the take-away?  Well, prepare to fork over another few bucks for your medicine in Maine and always remember that sales tax laws are not written with simplicity in mind