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New Mexico’s largest medical cannabis producer suing over gross receipts taxes

New Mexico’s largest medical marijuana producer, a Sandoval-County based nonprofit Ultra Health, filed a lawsuit against the state Taxation and Revenue Department last week to recover over $1.5 million in gross receipts taxes.

Ultra Health argues that that, as a medicine, cannabis products should be excluded from gross receipt taxation. A gross receipts tax is similar to a sales tax; only it is levied on the seller of the goods, or the service consumers.

In accordance with New Mexico state law, prescription drugs are exempt from gross receipts taxes. The lawsuit, filed in the state District Court in Santa Fe, argues that cannabis used for medical purposes should be treated the same as prescription medication.

The state law establishing cannabis-use for medicinal purposes states that patients can only be certified to use marijuana if a physician gives them a recommendation. Ultra Health argues that there is no difference between a doctor’s “recommendation” and a “prescription.”

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The Santa Fe New Mexican reported that the CEO and president of Ultra Health, Duke Rodriguez, stated that if the lawsuit is successful, it will help patients enrolled in the state’s Medical Cannabis Program because the cost of gross receipts taxes is passed on to the customers.

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The price for prescriptions

Affordability for prescription medication and access to acceptable health care is a nationwide issue. The same holds for patients in New Mexico that take marijuana for medicinal purposes.

“Affordability is an issue for all New Mexicans, and even a more significant burden to the severe qualifying conditions suffered by medical cannabis patients,” Rodriguez said in a statement provided by his lawyer, Kate Ferlick.

“Patients already pay 100 percent out of pocket for medical cannabis,” Rodriguez stated, “If the average cost of medicine for patients is $2,300 a quarter, the average [gross receipts tax] burden on medical cannabis is nearly $1,000 a year.

“This is a huge undue burden on patients with debilitating medical conditions. ...It is time that we recognize the tax fairness due medical cannabis patients who are making a healthier and fiscally responsible choice for their well being.”

New Mexico’s Medical Cannabis Program currently has approximately 67,754 active patients.

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State Sen. Jerry Ortiz y Pino (Albuquerque) announced on Tuesday that he plans to introduce a bill that would exempt medical cannabis products from gross receipts taxes.

Ultra Health and the lawsuit(s)

According to this most recently filed lawsuit, Ultra Health is asking for a refund of $1,541,088, plus interest and attorney’s fees. This amount is what Ultra Health paid in gross receipts taxes between Jan. 1, 2015, and May 31, 2018.

Ultra Health initially filed a request for this refund with the state Taxation and Revenue Department, but the Department denied the request in November of last year.

Gross receipts taxation is a popular lawsuit topic in the state. Sacred Garden, a Santa Fe-based marijuana producer, also requested a gross receipt taxes refund in 2018 from the Department, which was ultimately denied. Sacred Garden has appealed the administrative decision to the state Court of Appeals, where the case is listed as pending.

This is also not the first time that Ultra Health has taken to the claims court to tackle issues with the state Medical Cannabis Program. In the latter half of 2018, Ultra Health sued the state Department of Health over regulations about cannabis products such as edibles and lotions.

In November 2018, Ultra Health won a separate lawsuit against the state DOH. This lawsuit pertained to the restriction on the number of licensed cannabis plants producers could grow; which was, at the time of the lawsuit, only 450 plants.

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State District Judge David Thomson ruled that this number of pot plants was arbitrary, and required that the DOH establish a new plant limit in four months following a statewide study on the issue.

If Ultra Health wins this particular lawsuit, it will establish medical marijuana as being the legal and fiscal equivalent of a medical prescription, as it pertains to gross receipts taxation.

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