,i #aacth ,,congress #ast ,session ,h4 ,r4 #eja ,,in ,,the ,,house ,,of ,,representatives ,february #e1 #bjac ,mr4 ,blumenauer 7for himself1 ,mr4 ,polis1 and ,mr4 ,cohen7 introduced the following bill2 which was referred to the ,committee on ,ways and ,means ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to provide for the taxation of marijuana1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,marijuana ,tax ,equity ,act of #bjac4 #b4 ,taxation ,relating to ,marijuana 7a7 ,in general ,subtitle ,e of title ,i of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new chapter3 #ef ,marijuana ,subchapter ,a4 ,producer ,tax4 ,subchapter ,b4 ,special ,provisions ,relating to ,marijuana ,enterprises4 ,subchapter ,c4 ,penalties4 ,a ,producer ,tax ,sec4 #eija4 ,imposition of tax4 ,sec4 #eijb4 ,exemption from tax4 ,sec4 #eijc4 ,special rules4 ,sec4 #eijd4 ,definitions4 #eija4 ,imposition of tax 7a7 ,imposition of tax ,there is hereby imposed a tax on the sale of marijuana by the producer or importer thereof4 7b7 ,amount of tax ,the amount of the tax imposed by subsection 7a7 shall be #ej percent of the price for which so sold4 #eijb4 ,exemption from tax 7a7 ,general rule ,under regulations prescribed by the ,secretary1 no tax shall be imposed under this subchapter on the sale by the producer or importer of an article-- 7#a7 for use by the purchaser for further production1 or for resale by the purchaser to a second purchaser for use by such second purchaser in further production1 or 7#b7 for export1 or for resale by the purchaser to a second purchaser for export4 7b7 ,proof of resale for further production2 proof of export ,where an article has been sold free of tax under subsection 7a7-- 7#a7 for resale by the purchaser to a second purchaser for use by such second purchaser in further production1 or 7#b7 for export1 or for resale by the purchaser to a second purchaser for export1 subsection 7a7 shall cease to apply in respect of such sale of such article unless1 within the #f-month period which begins on the date of the sale by the producer or importer 7or1 if earlier1 on the date of shipment by the producer or importer71 the producer or importer receives proof that the article has been exported or resold for use in further production4 7c7 ,producer or importer relieved from liability in certain cases ,in the case of any article sold free of tax under this section 7other than a sale to which subsection 7b7 applies71 if the producer or importer in good faith accepts a certification by the purchaser that the article will be used in accordance with the applicable provisions of law1 no tax shall thereafter be imposed under this chapter in respect of such sale by such producer or importer4 7d7 ,export ,for purposes of this section1 the term export includes shipment to a possession of the ,united ,states2 and the term exported includes shipped to a possession of the ,united ,states4 7e7 ,use in further production ,an article shall be treated as sold for use in further production if such article is sold for use by the purchaser for further planting1 cultivating1 or harvesting4 7f7 ,further producer liable for tax ,for purposes of this chapter1 a producer to whom an article is sold or resold free of tax under subsection 7a77#a7 for use by him in further production shall be treated as the producer of such article4 #eijc4 ,special rules 7a7 ,definition of ,price ,for purposes of this chapter-- 7#a7 ,containers1 packing and transportation charges ,in determining1 for the purposes of this chapter1 the price for which an article is sold1 there shall be included any charge for coverings and containers of whatever nature1 and any charge incident to placing the article in condition packed ready for shipment1 but there shall be excluded the amount of tax imposed by this chapter1 whether or not stated as a separate charge4 ,a transportation1 delivery1 insurance1 installation1 or other charge 7not required by the foregoing sentence to be included7 shall be excluded from the price only if the amount thereof is established to the satisfaction of the ,secretary in accordance with regulations4 7#b7 ,constructive sale price 7,a7 ,in general ,if an article is sold at retail1 sold on consignment1 or sold 7otherwise than through an arm's length transaction7 at less than the fair market price1 the tax under section #eija shall be computed on the price for which such articles are sold1 in the ordinary course of trade1 by producers thereof1 as determined by the ,secretary4 ,in the case of an article sold at retail1 the computation under the preceding sentence shall be on whichever of the following prices is the lower3 7i7 the price for which such article is sold1 or 7ii7 the highest price for which such articles are sold to manufacturers1 in the ordinary course of trade1 by producers thereof1 as determined by the ,secretary4 ,this paragraph shall not apply if subparagraph 7,b7 applies4 7,b7 ,special rule ,if an article is sold at retail or to a retailer1 and if-- 7i7 the producer or importer of such article regularly sells such articles at retail or to retailers1 as the case may be1 7ii7 the producer or importer of such article regularly sells such articles to one or more manufacturers in arm's length transactions and he establishes that his prices in such cases are determined without regard to any tax benefit under this paragraph1 and 7iii7 the transaction is an arm's length transaction1 the tax under this chapter shall 7if based on the price for which the article is sold7 be computed under subparagraph 7,c74 7,c7 ,price for purposes of special rule ,the price computed under this subparagraph is whichever of the following prices is the lower3 7i7 the price for which such article is sold1 or 7ii7 the highest price for which such articles are sold by such producer1 or importer to manufacturers4 7,d7 ,definition of lowest price ,for purposes of subparagraphs 7,a7 and 7,c71 the lowest price shall be determined-- 7i7 without requiring that any given percentage of sales be made at that price1 and 7ii7 without including any fixed amount to which the purchaser has a right as a result of contractual arrangements existing at the time of the sale4 7,e7 ,arm's length 7i7 ,in general ,for purposes of this section1 a sale is considered to be made under circumstances otherwise than at arm's length if-- 7,i7 the parties are members of the same controlled group1 whether or not such control is actually exercised to influence the sale price1 or 7,,ii7 the sale is made pursuant to special arrangements between a manufacturer and a purchaser4 7ii7 ,controlled groups 7,i7 ,in general ,the term controlled group has the meaning given to such term by subsection 7a7 of section #aefc1 except that more than #ej percent shall be substituted for at least #hj percent each place it appears in such subsection4 7,,ii7 ,controlled groups which include nonincorporated persons ,under regulations prescribed by the ,secretary1 principles similar to the principles of subclause 7,i7 shall apply to a group of persons under common control where #a or more of such persons is not a corporation4 7#c7 ,partial payments ,in the case of-- 7,a7 a contract for the sale of an article wherein it is provided that the price shall be paid by installments and title to the article sold does not pass until a future date notwithstanding partial payment by installments1 7,b7 a conditional sale1 or 7,c7 a chattel mortgage arrangement wherein it is provided that the sales price shall be paid in installments1 there shall be paid upon each payment with respect to the article a percentage of such payment equal to the rate of tax in effect on the date such payment is due4 7#d7 ,sales of installment accounts ,if installment accounts1 with respect to payments on which tax is being computed as provided in paragraph 7#c71 are sold or otherwise disposed of1 then paragraph 7#c7 shall not apply with respect to any subsequent payments on such accounts 7other than subsequent payments on returned accounts with respect to which credit or refund is allowable by reason of section #fdaf7;b77#e771 but instead-- 7,a7 there shall be paid an amount equal to the difference between-- 7i7 the tax previously paid on the payments on such installment accounts1 and 7ii7 the total tax which would be payable if such installment accounts had not been sold or otherwise disposed of 7computed as provided in paragraph 7#c772 except that 7,b7 if any such sale is pursuant to the order of1 or subject to the approval of1 a court of competent jurisdiction in a bankruptcy or insolvency proceeding1 the amount computed under subparagraph 7,a7 shall not exceed the sum of the amounts computed by multiplying-- 7i7 the proportionate share of the amount for which such accounts are sold which is allocable to each unpaid installment payment by 7ii7 the rate of tax under this chapter in effect on the date such unpaid installment payment is or was due4 ,the sum of the amounts payable under this subsection and subsection 7c7 in respect of the sale of any article shall not exceed the total tax4 7b7 ,certain uses treated as sales ,any producer of marijuana which uses such marijuana before it is sold shall be liable for the tax imposed by section #eija in the same manner as if such marijuana were sold by such producer4 7c7 ,application of tax in case of sales by other than producer ,in case any person acquires from the producer of marijuana1 by operation of law or as a result of any transaction not taxable under section #eija1 the right to sell such marijuana1 the sale of such marijuana by such person shall be taxable under this chapter as if made by the producer1 and such person shall be liable for the tax4 #eijd4 ,definitions ,for purposes of this chapter-- 7#a7 ,marijuana ,the term marijuana has the meaning given such term by section #ajb7af7 of the ,controlled ,substances ,act 7#ba ,u4,s4,c4 #hjb74 7#b7 ,marijuana product ,the term marijuana product means any article which contains marijuana1 including an article which is a concentrate1 an edible1 a tincture1 a marijuana-infused product1 or a topical4 7#c7 ,producer ,the term producer means any person who plants1 cultivates1 harvests1 or in any way facilitates the natural growth of1 marijuana4 7#d7 ,manufacturer ,the term manufacturer means a person who manufactures1 compounds1 converts1 processes1 prepares1 or packages marijuana or marijuana products4 7#e7 ,importer ,the term importer means-- 7,a7 any person in the ,united ,states to whom nontaxpaid marijuana products1 or any processed marijuana1 manufactured in a foreign country1 ,puerto ,rico1 the ,virgin ,islands1 or a possession of the ,united ,states are shipped or consigned2 and 7,b7 any person who smuggles or otherwise unlawfully brings marijuana or marijuana products into the ,united ,states4 7#f7 ,distributor ,the term distributor means a person who distributes marijuana or marijuana products4 7#g7 ,retailer ,the term retailer means a person who sells marijuana or marijuana products to consumers4 7#h7 ,marijuana enterprise ,the term marijuana enterprise means a producer1 importer1 manufacturer1 distributor1 retailer or any person who transports1 stores1 displays1 or otherwise participates in any business activity that handles marijuana or marijuana products4 ,b ,special ,provisions ,relating to ,marijuana ,enterprises ,sec4 #eiaa4 ,occupational tax4 ,sec4 #eiab4 ,application for permit4 ,sec4 #eiac4 ,permit4 ,sec4 #eiad4 ,inspection of books4 #eiaa4 ,occupational tax 7a7 ,imposition of tax ,there is hereby imposed a special tax to be paid by each person who is engaged in a marijuana enterprise4 7b7 ,amount of tax ,the amount of the tax imposed under subsection 7a7 shall be-- 7#a7 #a1jjj per year in the case of a producer1 importer1 or manufacturer1 and 7#b7 #ejj per year in the case of any person engaged in a marijuana enterprise who is not described in paragraph 7#a74 #eiab4 ,application for permit ,every person1 before commencing business as a marijuana enterprise1 and at such other time as the ,secretary shall by regulation prescribe1 shall make application for the permit provided for in section #eiac4 ,the application shall be in such form as the ,secretary shall prescribe and shall set forth1 truthfully and accurately1 the information called for on the form4 ,such application may be rejected and the permit denied if the ,secretary1 after notice and opportunity for hearing1 finds that-- 7#a7 the premises on which it is proposed to conduct the business are not adequate to protect the revenue1 7#b7 the activity proposed to be carried out at such premises does not meet such minimum capacity or activity requirements as the ,secretary may prescribe1 or 7#c7 such person 7including1 in the case of a corporation1 any officer1 director1 or principal stockholder and1 in the case of a partnership1 a partner7-- 7,a7 is1 by reason of his business experience1 financial standing1 or trade connections or by reason of previous or current legal proceedings involving a felony violation of any other provision of ,federal criminal law relating to marijuana or marijuana products1 not likely to maintain operations in compliance with this chapter1 7,b7 has been convicted of a felony violation of any provision of ,federal or ,state criminal law relating to marijuana or marijuana products1 or 7,c7 has failed to disclose any material information required or made any material false statement in the application therefor4 #eiac4 ,permit 7a7 ,issuance ,a person shall not engage in business as a marijuana enterprise without a permit to engage in such business4 ,such permit1 conditioned upon compliance with this chapter and regulations issued thereunder1 shall be issued in such form and in such manner as the ,secretary shall by regulation prescribe4 ,a new permit may be required at such other time as the ,secretary shall by regulation prescribe4 7b7 ,suspension or ,revocation 7#a7 ,show cause hearing ,if the ,secretary has reason to believe that any person holding a permit-- 7,a7 has not in good faith complied with this chapter1 or with any other provision of this title involving intent to defraud1 7,b7 has violated the conditions of such permit1 7,c7 has failed to disclose any material information required or made any material false statement in the application for such permit1 7,d7 has failed to maintain his premises in such manner as to protect the revenue1 7,e7 is1 by reason of previous or current legal proceedings involving a felony violation of any other provision of ,federal criminal law relating to marijuana1 not likely to maintain operations in compliance with this chapter1 or 7,f7 has been convicted of a felony violation of any provision of ,federal or ,state criminal law relating to marijuana or marijuana products1 the ,secretary shall issue an order1 stating the facts charged1 citing such person to show cause why his permit should not be suspended or revoked4 7#b7 ,action following hearing ,if1 after hearing1 the ,secretary finds that such person has not shown cause why his permit should not be suspended or revoked1 such permit shall be suspended for such period as the ,secretary deems proper or shall be revoked4 7c7 ,information reporting ,the ,secretary may require-- 7#a7 information reporting by any person issued a permit under this section1 and 7#b7 information reporting by such other persons as the ,secretary deems necessary to carry out this chapter4 7d7 ,inspection or disclosure of information ,for rules relating to inspection and disclosure of returns and return information1 see section #fajc7o74 #eiad4 ,regulations ,the ,secretary may issue such regulations or other guidance as the ,secretary determines necessary or appropriate to carry out this chapter1 including the filing of returns under this chapter in electronic format4 ,c ,penalties ,sec4 #eiba4 ,civil penalties4 ,sec4 #eibb4 ,criminal penalties4 #eiba4 ,civil penalties 7a7 ,omitting ,things ,required or ,doing ,things ,forbidden ,whoever omits1 neglects1 or refuses to comply with any duty imposed upon him by this chapter1 or to do1 or cause to be done1 any of the things required by this chapter1 or does anything prohibited by this chapter1 shall in addition to any other penalty provided in this title1 be liable to a penalty of #a1jjj1 to be recovered1 with costs of suit1 in a civil action1 except where a penalty under subsection 7b7 or 7c7 or under section #ffea or #ffec or part ,,ii of subchapter ,a of chapter #fh may be collected from such person by assessment4 7b7 ,exception ,no penalty shall be imposed under subsection 7a7 if it is shown that there was a reasonable cause and that the taxpayer acted in good faith4 7c7 ,failure ,to ,pay ,tax ,whoever fails to pay any tax imposed by this chapter at the time prescribed by law or regulations1 shall1 in addition to any other penalty provided in this title1 be liable to a penalty of #e percent of the tax due but unpaid4 7d7 ,sale of ,marijuana or ,marijuana ,products for ,export 7#a7 ,every person who sells1 relands1 or receives within the jurisdiction of the ,united ,states any marijuana or marijuana products which have been labeled or shipped for exportation under this chapter1 7#b7 every person who sells or receives such relanded marijuana or marijuana products1 and 7#c7 every person who aids or abets in such selling1 relanding1 or receiving1 shall1 in addition to the tax and any other penalty provided in this title1 be liable for a penalty equal to the greater of #a1jjj or #e times the amount of the tax imposed by this chapter4 ,all marijuana and marijuana products relanded within the jurisdiction of the ,united ,states shall be forfeited to the ,united ,states and destroyed4 ,all vessels1 vehicles1 and aircraft used in such relanding or in removing such marijuana or marijuana products from the place where relanded1 shall be forfeited to the ,united ,states4 7e7 ,applicability of ,section #fffe ,the penalties imposed by subsections 7b7 and 7c7 shall be assessed1 collected1 and paid in the same manner as taxes1 as provided in section #fffe7;a74 7f7 ,cross ,references ,for penalty for failure to make deposits or for overstatement of deposits1 see section #ffef4 #eibb4 ,criminal penalties 7a7 ,fraudulent ,offenses ,whoever1 with intent to defraud the ,united ,states-- 7#a7 ,engaging in business unlawfully ,engages in business as a marijuana enterprise without filing the application and obtaining the permit where required by this chapter or regulations thereunder1 7#b7 ,failing to furnish information or furnishing false information ,fails to keep or make any record1 return1 report1 or inventory1 or keeps or makes any false or fraudulent record1 return1 report1 or inventory1 required by this chapter or regulations thereunder1 7#c7 ,refusing to pay or evading tax ,refuses to pay any tax imposed by this chapter1 or attempts in any manner to evade or defeat the tax or the payment thereof1 7#d7 ,sales and transfers of marijuana or marijuana products unlawfully ,sells or otherwise transfers1 contrary to this chapter or regulations thereunder1 any marijuana or marijuana products subject to tax under this chapter1 or 7#e7 ,taxable event after tax exemption ,with intent to defraud the ,united ,states1 purchases1 receives1 possesses1 offers for sale1 or sells or otherwise disposes of1 any marijuana or marijuana product-- 7,a7 upon which the tax has not been paid or determined in the manner and at the time prescribed by this chapter or regulations thereunder1 or 7,b7 which1 without payment of tax pursuant to section #eijb1 have been diverted from the applicable purpose or use specified in that section1 shall1 for each such offense1 be fined not more than #aj1jjj1 or imprisoned not more than #e years1 or both4 7b7 ,other ,offenses ,whoever1 otherwise than as provided in subsection 7a71 violates any provision of this chapter1 or of regulations prescribed thereunder1 shall1 for each such offense1 be fined not more than #a1jjj1 or imprisoned not more than #a year1 or both4 7c7 ,liability to tax ,any person who possesses marijuana or marijuana products in violation of subsection 7a7 shall be liable for a tax equal to the tax on such articles4 4 7b7 ,study ,not later than two years after the date of the enactment of this ,act1 and every five years thereafter1 the ,secretary of the ,treasury shall-- 7#a7 conduct a study concerning the characteristics of the marijuana industry1 including the number of persons operating marijuana enterprises at each level 7e4g41 producers1 distributors1 manufacturers71 the volume of sales1 the amount of tax collected each year1 the areas of evasion1 and 7#b7 submit to ,congress recommendations to improve the regulation of the industry and the administration of the related tax4 7c7 ,conforming ,amendment ,section #fajc7o77#a77;,a7 of such ,code is amended by striking and firearms and inserting firearms1 and marijuana4 7d7 ,clerical amendment ,the table of chapters for subtitle ,e of title ,i of such ,code is amended by adding at the end the following new chapter3 ,chapter #ef4 ,marijuana4 4 7e7 ,effective date 7#a7 ,in general ,the amendments made by this section shall apply to-- 7,a7 applications for permits under section #eiab of the ,internal ,revenue ,code of #aihf 7as added by subsection 7a77 after the date of the enactment of this ,act1 and 7,b7 sales after ,december #ca1 #bjac4 7#b7 ,special rules for existing businesses ,in the case of any producer operating under a permit issued on or before the date of the enactment of this ,act under ,state law1 the requirements under section #eiab of such ,code 7as so added7 shall apply beginning on the date that is #f months after the date of the enactment of this ,act4