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Tax Relief

Tax Relief does not endorse drug use

Because tax doesn’t have to be taxing. A less-than-serious look back at some of the quirkier tax stories from the past month.

Don’t tax my weed delivery!

The US Internal Revenue Service (IRS) won its case against two Californian cannabis distributors over the tax treatment of posting weed by FedEx.

The Ninth Circuit Court of Appeals ruled in favour of the taxman and against the Organic Cannabis Foundation and the Northern California Small Business (NSCB) Assistants. The decision is a blow for potheads and their local providers.

The two taxpayers were trying to overturn the IRS claim that they were subject to Section 280E of the Internal Revenue Code, which denied them tax deductions on deliveries of special brownies and other pot-related goods. Together, the two businesses face a combined tax bill of almost $2 million.

Although legal in the weed-friendly state of California, cannabis is still a controlled substance at the federal level in the US. The fact that the substance is legal in some states and illegal at the federal level means certain agricultural businesses can be denied access to tax deductions.

Until US law changes, cannabis distributors will continue to face a tax disadvantage. "Wait, what's happening?" asked one connoisseur of organic products. "Can we still get a delivery tonight?" The short answer is yes, but it will cost more.

Tax gon’ give it to ya?

Convicted tax-dodger Earl Simmons, the rapper known as DMX, has got himself into hot water over his taxes once again. The Yonkers rapper has been issued with a tax warrant for almost $225,000 from the State of New York.

The case goes back to when Simmons was released from prison in January 2019 after serving almost a year for 14 federal counts of tax fraud. He was ordered to pay $2.3 million in restitution to the US government and handed three years of supervised release after his prison term. He has since fallen behind on his payments.

"We're working on resolving it," said attorney Murray Richman, who represents DMX. "We will, of course, eventually resolve it, which we've done in the past because we resolved the IRS situation. We'll work out a payment schedule, work out a real number and we'll be there."

It's not the first time either. DMX failed to pay taxes from 2002 to 2005 and from 2010 to 2015. He eventually pleaded guilty to one count of tax fraud, but he denied all other charges. Simmons claimed that he didn't knowingly dodge taxes.

DMX stresses that he was just living a "cash lifestyle". Nevertheless, Simmons can now join the ranks of such famous US tax dodgers as cigar aficionado Al Capone and Sinbad (the comedian, not the sailor).

PwC sued for ‘ineffective’ tax advice

Multimillionaire John Hargreaves, founder of UK retail chain Matalan, has sued the Big Four firm for allegedly giving him "ineffective" tax avoidance advice.

Hargreaves claims PwC advised him on how to move to the renowned tourism hub Monaco, where he could avoid paying capital gains tax and income tax in the UK. The Big Four firm has said it believed its tax advice was sound and that it will be defending its record.

The case goes back to 2000 when Hargreaves was looking to sell £237 million ($262 million) worth of shares in Matalan when the company went public in 1998. The Big Four firm reportedly advised Hargreaves to move to the alleged tax haven and offload the shares in one bulk transaction.

HM Revenue & Customs, the UK tax authority, launched an investigation soon after it turned out Hargreaves was working at Matalan's head office in Liverpool three days a week. After a lengthy court battle, Hargreaves was forced to pay out £35 million to the British taxman.

Hargreaves won in another case against HMRC over £84 million in taxes concerning his move to Monte Carlo. The judge threw out the case because it was just too old. Fortunately, Hargreaves faces no claims of being "ineffective" in the courts.

more across site & bottom lb ros

More from across our site

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The controversial measure is being watered down after criticism from the European Central Bank.
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The General Court reverses its position taken four years ago, while the UN discusses tax policy in New York.
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Pillar two might be top of mind for many multinational companies, but the huge variations between countries’ readiness means getting ahead of the game now, argues Russell Gammon, chief solutions officer at Tax Systems.
ITR’s latest quarterly PDF is going live today, leading on the looming battle between the UN and the OECD for dominance in global tax policy.