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The Puzzling Position of Pot

  • Sep 4, 2013 | Gail Cole

 Marijuana, states, and the federal government: eventually someone has to blink.

Nearly half of the states in the country have legalized the use of medical marijuana. Two of those states have also legalized the use and possession of recreational pot. Yet while voters from New Hampshire to Washington cast votes in favor of more lenient marijuana laws, the federal government maintains that it is an illegal drug under the Controlled Substances Act (CSA). As such, it is open to federal prosecution. This puts pot is a puzzling position.


It was beginning to feel a bit like a staring contest between states and the federal government. A state would pass a law legalizing some use of marijuana, and the federal government would raid a legal medical marijuana dispensary. Someone had to blink first. This time, it was the United States Department of Justice (DOJ).

Late last month, the DOJ updated its guidance on marijuana enforcement under the CSA to reflect the fact that "under state law, the possession of small amounts of marijuana…." is legal and that state laws provide for "the regulation of marijuana production, processing, and sale." The new guidelines apply "to all federal enforcement activity, including civil enforcement and criminal investigations and prosecutions, concerning marijuana in all states." Of particular note is the fact that the DOJ may relax its restrictions on financial institutions working with marijuana businesses.

A dangerous drug

If the DOJ is recognizing a need for flexibility, it still maintains that "marijuana is a dangerous drug" and "the illegal distribution and sale of marijuana is a serious crime that provides a significant source of revenue to large-scale criminal enterprises, gangs, and cartels."

That said, the Department of Justice is focusing on eight enforcement areas with respect to marijuana, medical or recreational:

  • Prevent the distribution of marijuana to minors;
  • Prevent revenue generated by sales of marijuana from going to criminal enterprises, gangs, and cartels;
  • Prevent the diversion of marijuana from states where it is legal under state law to other states;
  • Prevent state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;
  • Prevent violence and the use of firearms in the cultivation and distribution of marijuana;
  • Prevent driving under the influence of marijuana and the exacerbation of other adverse public health consequences associated with marijuana use;
  • Prevent the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and
  • Prevent marijuana possession or use on federal property.

Federal prosecutors are expected to prioritize these eight areas, particularly in Washington and Colorado, where recreational marijuana is in the process of becoming legal. The DOJ has stressed that "if any of the stated harms do materialize--either despite a strict regulatory scheme or because of a lack of one--federal prosecutors will act aggressively to bring individual prosecutions focused on federal enforcement priorities and the Department may challenge the regulatory scheme themselves in these states."

If the federal government expects states to establish a regulatory scheme for marijuana production, distribution and possession, so do state governments. Colorado and Washington are looking forward to the additional tax revenue sales of pot will generate; if those sales take place outside of a regulated system, that revenue will be lost.

Where marijuana can be legally bought now

The 22 states listed below (with the year the law passed) have to some extent legalized the use of medical marijuana:

In November 2013, Colorado and Washington State voters approved the legalization of recreational marijuana. Coloradans will be able to legally purchase small amounts of pot in January, 2014. It has been legal to possess small amounts of pot in Washington since December of last year, but it won't be possible to legally purchase it until December 1, 2013.

According to ProCon, a nonprofit public charity created to "provide resources for critical thinking and to educate without bias," most states require proof of residency for marijuana purchase. Oregon is currently the only exception to that rule.

Where to look in the future

The Huffington Post predicts the following states will try to legalize recreational pot in the near future:

  • Alaska,
  • Arizona,
  • California,
  • Nevada,
  • Oregon,
  • Maine,
  • Massachusetts,
  • Montana,
  • Rhode Island, and
  • Vermont.

Any state that legalizes the recreational use of pot will likely tax it as it taxes alcohol, cigarettes, and other so-called sins. Sin taxes are typically higher than other rates of tax.

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photo credit: Jonah G.S. via photopin cc

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.