Forbes:  “With 15 states having legalized the sale of medicinal marijuana, the only thing growing faster than the number of 24-year old males with questionable glaucoma prescriptions is the IRS’s scrutiny of this controversial industry.  While local law may have blessed the existence of medicinal marijuana facilities, the IRS is not bound by such decisions. The IRS cares only about tax collections, and during 2012 it threw down the gauntlet, presenting a flurry of challenges to medicinal marijuana dispensaries that indicate the Service’s willingness, and more importantly, its ability, to tax the industry out of existence.  In early March, the IRS audited tax returns of a Marin County, California facility and denied all of the company’s deductions — payroll, rent, utilities…everything –  for 2008 and 2009, resulting in an assessed tax in the “millions and millions” according to the facility’s founder and director.”

Read the Tax Court’s opinion involving Martin Olive’s dispensary called The Vapor Room in the case of Olive v. Commissioner, 139 T.C. 2, (2012).