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Marijuana Advocates Say Special Taxes Lawsuit Could Overturn All Pot Licensing Regs

Marijuana Advocates Say Special Taxes Lawsuit Could Overturn All Pot Licensing Regs

In June, we told you about a lawsuit filed by attorney Rob Corry on behalf of a group called No Over Taxation. It contends that special taxes placed on marijuana sales are illegal and unconstitutional; see the complaint and more documents below.

Tomorrow, a hearing in the case is scheduled, and cannabis advocates encouraging attendance contend that should the suit be successful, it could spell the end for marijuana licensing and registration regulations statewide.

See also: Marijuana: Lawsuit claims special pot taxes are illegal and unconstitutional

Plaintiffs in the suit, shared here along with a summons to defendants such as Governor John Hickenlooper and Denver mayor Michael Hancock, include marijuana activist Kathleen Chippi and Miguel Lopez, founder of the Denver 4/20 rally. Here's the complaint's synopsis:

Plaintiffs, through undersigned counsel, hereby petition and apply for injunctive and declaratory relief, and for a refund and damages, against Defendants and their collection and enforcement of illegal and unconstitutional Marijuana Taxes, as provided in Colorado Proposition AA and Denver Referred Question 2A.
Rob Corry at an anti-marijuana taxation rally last year.
Rob Corry at an anti-marijuana taxation rally last year.

As we've reported, Corry isn't against taxes on marijuana. However, he believes cannabis should be "taxed just like any other product -- no more and no less. There should not be specific marijuana taxes."

This view would seem to contradict Amendment 64, which calls for an excise tax of up to 15 percent. However, Corry told us in June, "there's nothing in Amendment 64 or the campaign for it that ever mentioned a separate sales tax on top of the excise tax. Basic economics tells you that a 15 percent excise tax is already high, and a sales tax that's directly assessed on the consumer raises costs astronomically when you couple them with the excise tax. But the government has expanded that narrow mandate to create a much more massive tax burden."

The special pot-tax provisions are attacked on a number of fronts that Corry said are "independent causes of action -- they stand alone." Here's his synopses of each one.

"The primary cause of action is based on the Timothy Leary case before the U.S. Supreme Court," he pointed out, referring to 1969's Leary v. U.S. "That case struck down the Marihuana Tax Act of 1937 after Leary successfully argued to the court that payment of a marijuana tax was a violation of the Fifth Amendment right to avoid self-incrimination.

"The second claim is based on the public-policy argument that state and local governments cannot collect taxes expressly on activity that is federally illegal," he went on. "So the taxes are illegal.

"Our third claim," he allowed, "has to do with Amendment 64 itself. The purpose of Amendment 64 was to tax marijuana like alcohol -- and there's also a component in Amendment 64 that prohibits any regulation that is 'unreasonably impracticable.' And this is that. The taxes are so high that it makes it impracticable to run a reasonable business.

"Amendment 64 set out to end prohibition, the black-market trade in Colorado, and transform it from an unregulated, underground market into a regulated, legitimate, tax-paying market. But if you set taxes too high, you empower an underground market. So high taxation is 'prohibition lite.' And even as the state government has made it a criminal offense not to pay marijuana taxes, the federal government has made it a crime to pay the taxes. That puts individuals between a rock and a hard place."

Governor John Hickenlooper is listed as a defendant in the complaint.
Governor John Hickenlooper is listed as a defendant in the complaint.

Regarding the fourth claim in the complaint, "it's based on equity," Corry maintained. "Equity is a separate legal concept that allows plaintiffs to potentially recover moneys when they don't have a legal remedy because it would be inequitable for the defendants to keep the money. And we're arguing that since state and local governments are retaining money from illegal activities, they ought to refund all of it."

Such arguments will be heard tomorrow -- and a Cannabis Therapy Institute release featuring details about the hearing, which gets underway at 9 a.m. in Denver District Court, suggests that it could have far-reaching repercussions. We've reproduced the release below, but one excerpt reads:

If successful, Corry's lawsuit could be the basis for overturning ALL regulations regarding marijuana licensing and registration in Colorado on the same grounds. As long as marijuana remains illegal under federal law, states cannot require people to give any information about themselves in order to distribute or purchase marijuana. ANY and ALL requirements to identify oneself would result in a "real and appreciable" risk of self-incrimination, and would require a citizen to implicate himself in federal crimes.

Continue to see the lawsuit, the summons and the Cannabis Therapy Institute release about tomorrow's hearing.   Editor's note: The complaint below includes links to numerous articles and posts, with Westword among the news agencies cited.

No Over Taxation v. John Hickenlooper Complaint

No Over Taxation v. John Hickenlooper Summons

Cannabis Therapy Institute release:

Marijuana Tax Fifth Amendment Hearing on Friday (8/22)

{Denver} -- There will be a preliminary injunction hearing in Denver District Court on Friday in a lawsuit brought by marijuana civil rights activists seeking to protect their Fifth Amendment right against self-incrimination. Plaintiffs will argue in front of The Honorable Judge John Madden IV that payment of marijuana taxes violates a citizen's Fifth Amendment right against self-incrimination, since marijuana remains illegal under federal law.

*THE PUBLIC IS ENCOURAGED TO ATTEND THIS HEARING*

Date: Friday, August 22, 2014 Time: 9 am to 12 noon Location: Denver District Court (Old Building) 1437 Bannock St. Denver, Colorado Courtroom #203: The Honorable Judge John Madden IV

Note: Please dress nicely and maintain quiet in the courtroom. Bring a photo ID with, as you may have to show it to get through courthouse security.

*BACKGROUND*

Attorney Robert J. Corry, Jr. filed the lawsuit on June 9, 2014 seeking to permanently end Colorado's marijuana taxes, on the grounds that payment of the taxes forces citizens to incriminate themselves as criminals under federal law.

The complaint was filed on behalf of an unnamed licensed medical and retail marijuana center, the "No Over Taxation" issue committee (which campaigned against Proposition AA, the marijuana tax issue approved by Colorado voters in 2013) and several individuals, including Kathleen Chippi, Larisa Bolivar, Miguel Lopez and William Chengelis.

Corry is seeking unspecified damages and a refund of all tax monies collected by the state.

If successful, Corry's lawsuit could be the basis for overturning ALL regulations regarding marijuana licensing and registration in Colorado on the same grounds. As long as marijuana remains illegal under federal law, states cannot require people to give any information about themselves in order to distribute or purchase marijuana. ANY and ALL requirements to identify oneself would result in a "real and appreciable" risk of self-incrimination, and would require a citizen to implicate himself in federal crimes.

As witnesses, the State of Colorado has called attorneys Brian Vicente and Christian Sederberg, two self-proclaimed "marijuana lawyers" who helped campaign for Amendment 64, to provide testimony to support the State's assertion that payment of these taxes is not incriminating.

Corry cites a 1973 Colorado Supreme Court case (People vs. Duleff) that overturned a man's conviction for "selling marijuana without a license" because compliance with the licensing requirement would have required that person to violate his constitutional right against self-incrimination and reveal a violation of federal law. Corry writes, "The Colorado Supreme Court held specifically that the Fifth Amendment prohibits state licensing requirements that force a person to reveal a violation of federal law."

From the Duleff decision, Corry quotes the Colo. Sup. Ct.: "The Fifth Amendment prohibits licensing requirements from being used as a means of discovering past or present criminal activity which is subject to prosecution by calling attention to the licensee and his activities.... There is no doubt that the information which Duleff would have been required to disclose would have been useful to the investigation of his activities, would have substantially increased the risk of prosecution, and may well have been a direct admission of guilt under federal law. The Fifth Amendment protects individuals from such compulsory, incriminating disclosures and provides a complete defense to prosecution." -- Colorado Supreme Court (1973)

Corry also cites a 1969 US Supreme Court case (Timothy Leary v. United States) in which the highest court in the country overturned Leary's marijuana possession conviction and ruled that the federal Marihuana Tax Act of 1937 was illegal, due to the fact that a person seeking a tax stamp and complying with the law would be forced to incriminate himself, in violation of the Fifth Amendment.

Corry writes, "Marijuana-specific taxes require plaintiffs and any other person paying said taxes to incriminate themselves as committing multiple violations of federal law, including but not limited to, participating in, aiding and abetting, or conspiring to commit a 'continuing criminal enterprise' and 'money laundering.' These illegally-collected taxes are ultimately laundered by the State of Colorado through J.P. Morgan Chase Bank, which also participates knowingly in the continuing criminal enterprise." Item 67, Corry complaint filed 6/9/14.

Corry concludes, "It is illegal for government to retain tax monies illegally collected in violation of the constitution, so all amounts must be returned, and all records related to previous tax payments, destroyed."

Corry asks the Court to: "Enter a temporary restraining order, preliminary injunction, and/or permanent injunction ordering the Defendants, and all those acting in concert with them, to cease and desist from enforcement of the marijuana tax statutes, to cease and desist from any further collection, deposit, or laundering of the marijuana taxes, for a full refund of marijuana tax monies paid by any person or entity, and for destruction of all tax records and identifying information after full refunds are made."

"The state can't have it both ways. If it's illegal under federal law, you cannot collect taxes on it," says Kathleen Chippi, a plaintiff and member of the Patient and Caregiver Rights Litigation Project. "We have another case pending in the Colorado Supreme Court now, Coats v. Dish Network, where Colorado Attorney General John Suthers argues that medical marijuana patients can be fired from their jobs for using medical marijuana off-duty, even though it is legal under state law. Suthers argues in the Coats case that, since marijuana is still illegal under federal law, patients have no rights."

"Yet Suthers and Hickenlooper, as kingpins in their continuing criminal enterprise, happily collect and spend the marijuana taxes, even though they were collected in spite of multiple clear violations of federal law," Chippi concludes.

Send your story tips to the author, Michael Roberts.


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