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Cannabis exempt from sales tax, producer argues

ALBUQUERQUE, N.M. — One of New Mexico’s most prominent medical marijuana producers has filed a lawsuit against the state, arguing that it is entitled to $1.5 million in gross-receipts tax deductions because medical cannabis products are considered prescription drugs under state law.

In a complaint filed Jan. 17 in the 1st Judicial District in Santa Fe, New Mexico Top Organics-Ultra Health, Inc. alleges that the New Mexico Department of Taxation and Revenue refused to process the deductions due to “bias against medical cannabis.”

“Medical cannabis meets the definition of a prescription drug under any common-sense interpretation of the relevant statutes,” wrote Ultra Health in the filing. “… In withholding a refund based on the deduction for ‘prescription drugs,’ the Department of Taxation and Revenue has acted unlawfully.”

New Mexico law allows those who sell prescription drugs to deduct them from their gross-receipts taxes. The law defines prescription drugs as substances dispensed under the supervision of a licensed pharmacist or physician, “or other person authorized under state law to do so.” Ultra Health argues in the complaint that the 2007 Lynn and Erin Compassionate Use Act renders certifications for medical cannabis equivalent to prescriptions as defined by the law, and that licensed non-profit producers like Ultra Health should be eligible for the deductions.

Ultra Health is seeking a $1.5 million refund, interest, attorney fees and costs. The $1.5 million covers the period between Jan. 1, 2015, and May 31, 2018, according to the filing.

Taxation and Revenue Secretary-designate Stephanie Schardin Clarke said in an email that the agency is unable to comment on pending litigation.

Duke Rodriguez, CEO and president of Ultra Health, said his organization pays millions of dollars in combined federal taxes, state taxes and license fees, and continues to pay gross-receipts taxes despite disagreeing with the state’s interpretation of the law.

“That burden is only going to grow, and it gets passed on to the patients,” said Rodriguez.

The lawsuit is one of several filed by Ultra Health against the state over the past year. In November, the organization prevailed in a case that argued the state’s limit on the number of plants licensed producers could grow was arbitrary.

Rodriguez said the lawsuits are not indications of litigiousness, but rather of Ultra Health “being on the forefront of issues.”

“It is a clear effort on our behalf to represent the views of the patients and to allow the producers to stand up for themselves,” he said.