Medical cannabis cannot be prescribed as medication, and is therefore subject to a state gross receipts tax levied on most other goods and services sold in the state.
That apparent contradiction is what a hearing officer for the New Mexico Administrative Hearings Office concluded on Feb. 26, after examining a claim that marijuana products grown and made under the purview of the state Department of Health's Medical Cannabis Program shouldn't be taxed because they are more like a prescribed medicine than a regular ol' commodity.
It was the latest milestone in Santa Fe dispensary Sacred Garden's losing attempt to claim a tax refund for nearly $530,000 from the Tax and Revenue Department going back to 2011.
The gross receipts tax on cannabis is estimated to bring in about $7 million for the state this fiscal year, according to figures collected through records requests by the company Ultra Health, which operates a dispensary in Santa Fe and others across New Mexico.
Technically, Sacred Garden had already withdrawn its claims for the money, and this decision was about a more theoretical question: Whether the state is legally allowed to tax sales of medical marijuana. But Sacred Garden owner Zeke Shortes says he is undeterred. He'll be taking his claims next to District Court.
"It was really disturbing to me that patients have to pay sales tax on medicine when they don't have to on pharmaceuticals," Shortes tells SFR. He says he's willing to keep paying legal fees to prove his point.
He'll likely have a hard time proving his case going forward, given the various statutes and laws lending medical cannabis a unique status at best and a criminal one at worst. A similar case in Washington also came down on the side of its tax department.
Here in New Mexico, according to the tax department, the Legislature explicitly avoided the term "prescription" when they adopted the medical cannabis law in 2007. Instead, Administrative Law Judge Chris Romero writes, it "established an alternate process for patients to acquire medical marijuana that was unlike methods generally associated with common prescription drugs."
To obtain medical marijuana, patients have to obtain a written recommendation from a physician certifying that they suffer from one of the debilitating qualifying conditions listed by the state and that they're aware of the risks and benefits of consuming cannabis. The tax department argues that's different from a prescription, which is essentially an order from a physician to a pharmacist that includes specific directions for dispensing medicine. The Administrative Hearing Office agreed with the tax department.
Even if Sacred Garden could successfully argue that medical cannabis is a prescription drug, it would still have to contend with marijuana prohibition by the feds. Weed isn't just illegal under federal law, but was singled out by a 1972 law as having "no currently accepted medical use" and classified as a Schedule I drug.
As long as that is the federal law, the administrative judge ruled, physicians in New Mexico and elsewhere "cannot be dispensed under prescription." It's similar to a conclusion that an appeals court in Washington state came to in August 2016.
In that case, a dispensary called Compassionate Kitchen tried to obtain $19,312 it had paid to the state as part of a retail tax on cannabis. The court referenced marijuana's Schedule I status and said that a physician who tried to prescribe it "would violate [federal law] and commit a crime."
In Washington, patients can obtain medical marijuana through a written authorization from a physician, similar to New Mexico. The appeals court's reasoning mirrored the tax department's in New Mexico, and reversed a lower court's decision in favor of Compassionate Kitchen.
"Medical marijuana authorizations do not require or direct anyone to dispense marijuana," it wrote. "They do not specify or mandate treatment of services. They do not prescribe ingredients, proportions, or directions for compounding."
Last year, Washington's Supreme Court declined to hear the matter, deferring to the appeals court decision.
Advocates and users have long argued that federal limits on research into cannabis have limited the medical establishment from studying how cannabis interacts with the human body, which would be a step toward regulating and prescribing it like other medications. Large opioid manufacturers who would then have to compete with the plant have bankrolled anti-pot legalization campaigns for years.
As with most questions about the plant's legal status, it always comes back to federal prohibition—leaving little hope for Shortes' appeal.
But there may be hope in waiting it out. A majority of Americans support legalizing cannabis outright, and if Congress can pass a bill altering the Schedule I status, all that would be needed is a president willing to sign it into law. That's unlikely to happen with the current administration, but we may only be three years away from a new one.
Editor's note: A previous version of this story stated that the decision against Sacred Garden was issued by a "hearing officer" from the Tax and Revenue Department. In fact, it was issued by an administrative judge from the New Mexico Administrative Hearings Office, a completely separate entity from the tax department. We have updated the article to reflect this correction, and we regret the error.