[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 501 Introduced in House (IH)]
113th CONGRESS
1st Session
H. R. 501
To amend the Internal Revenue Code of 1986 to provide for the taxation
of marijuana, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 5, 2013
Mr. Blumenauer (for himself, Mr. Polis, and Mr. Cohen) introduced the
following bill; which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide for the taxation
of marijuana, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Marijuana Tax Equity Act of 2013''.
SEC. 2. TAXATION RELATING TO MARIJUANA.
(a) In General.--Subtitle E of title I of the Internal Revenue Code
of 1986 is amended by adding at the end the following new chapter:
``CHAPTER 56--MARIJUANA
``subchapter a. producer tax.
``subchapter b. special provisions relating to marijuana enterprises.
``subchapter c. penalties.
``Subchapter A--Producer Tax
``Sec. 5901. Imposition of tax.
``Sec. 5902. Exemption from tax.
``Sec. 5903. Special rules.
``Sec. 5904. Definitions.
``SEC. 5901. IMPOSITION OF TAX.
``(a) Imposition of Tax.--There is hereby imposed a tax on the sale
of marijuana by the producer or importer thereof.
``(b) Amount of Tax.--The amount of the tax imposed by subsection
(a) shall be 50 percent of the price for which so sold.
``SEC. 5902. EXEMPTION FROM TAX.
``(a) General Rule.--Under regulations prescribed by the Secretary,
no tax shall be imposed under this subchapter on the sale by the
producer or importer of an article--
``(1) for use by the purchaser for further production, or
for resale by the purchaser to a second purchaser for use by
such second purchaser in further production, or
``(2) for export, or for resale by the purchaser to a
second purchaser for export.
``(b) Proof of Resale for Further Production; Proof of Export.--
Where an article has been sold free of tax under subsection (a)--
``(1) for resale by the purchaser to a second purchaser for
use by such second purchaser in further production, or
``(2) for export, or for resale by the purchaser to a
second purchaser for export,
subsection (a) shall cease to apply in respect of such sale of such
article unless, within the 6-month period which begins on the date of
the sale by the producer or importer (or, if earlier, on the date of
shipment by the producer or importer), the producer or importer
receives proof that the article has been exported or resold for use in
further production.
``(c) Producer or Importer Relieved From Liability in Certain
Cases.--In the case of any article sold free of tax under this section
(other than a sale to which subsection (b) applies), 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 law, no tax shall thereafter be imposed under this chapter in
respect of such sale by such producer or importer.
``(d) Export.--For purposes of this section, the term `export'
includes shipment to a possession of the United States; and the term
`exported' includes shipped to a possession of the United States.
``(e) 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 planting, cultivating, or harvesting.
``(f) Further Producer Liable for Tax.--For purposes of this
chapter, a producer to whom an article is sold or resold free of tax
under subsection (a)(1) for use by him in further production shall be
treated as the producer of such article.
``SEC. 5903. SPECIAL RULES.
``(a) Definition of Price.--For purposes of this chapter--
``(1) Containers, packing and transportation charges.--In
determining, for the purposes of this chapter, the price for
which an article is sold, there shall be included any charge
for coverings and containers of whatever nature, and any charge
incident to placing the article in condition packed ready for
shipment, but there shall be excluded the amount of tax imposed
by this chapter, whether or not stated as a separate charge. A
transportation, delivery, insurance, installation, or other
charge (not required by the foregoing sentence to be included)
shall be excluded from the price only if the amount thereof is
established to the satisfaction of the Secretary in accordance
with regulations.
``(2) Constructive sale price.--
``(A) In general.--If an article is sold at retail,
sold on consignment, or sold (otherwise than through an
arm's length transaction) at less than the fair market
price, the tax under section 5901 shall be computed on
the price for which such articles are sold, in the
ordinary course of trade, by producers thereof, as
determined by the Secretary. In the case of an article
sold at retail, the computation under the preceding
sentence shall be on whichever of the following prices
is the lower:
``(i) the price for which such article is
sold, or
``(ii) the highest price for which such
articles are sold to manufacturers, in the
ordinary course of trade, by producers thereof,
as determined by the Secretary. This paragraph
shall not apply if subparagraph (B) applies.
``(B) Special rule.--If an article is sold at
retail or to a retailer, and if--
``(i) the producer or importer of such
article regularly sells such articles at retail
or to retailers, as the case may be,
``(ii) 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 paragraph, and
``(iii) the transaction is an arm's length
transaction,
the tax under this chapter shall (if based on the price
for which the article is sold) be computed under
subparagraph (C).
``(C) Price for purposes of special rule.--The
price computed under this subparagraph is whichever of
the following prices is the lower:
``(i) the price for which such article is
sold, or
``(ii) the highest price for which such
articles are sold by such producer, or importer
to manufacturers.
``(D) Definition of lowest price.--For purposes of
subparagraphs (A) and (C), the lowest price shall be
determined--
``(i) without requiring that any given
percentage of sales be made at that price, and
``(ii) without including any fixed amount
to which the purchaser has a right as a result
of contractual arrangements existing at the
time of the sale.
``(E) Arm's length.--
``(i) In general.--For purposes of this
section, a sale is considered to be made under
circumstances otherwise than at arm's length
if--
``(I) the parties are members of
the same controlled group, whether or
not such control is actually exercised
to influence the sale price, or
``(II) the sale is made pursuant to
special arrangements between a
manufacturer and a purchaser.
``(ii) Controlled groups.--
``(I) In general.--The term
`controlled group' has the meaning
given to such term by subsection (a) of
section 1563, except that `more than 50
percent' shall be substituted for `at
least 80 percent' each place it appears
in such subsection.
``(II) Controlled groups which
include nonincorporated persons.--Under
regulations prescribed by the
Secretary, principles similar to the
principles of subclause (I) shall apply
to a group of persons under common
control where 1 or more of such persons
is not a corporation.
``(3) Partial payments.--In the case of--
``(A) 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 installments,
``(B) a conditional sale, or
``(C) a chattel mortgage arrangement wherein it is
provided that the sales price shall be paid in
installments,
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 due.
``(4) Sales of installment accounts.--If installment
accounts, with respect to payments on which tax is being
computed as provided in paragraph (3), are sold or otherwise
disposed of, then paragraph (3) shall not apply with respect to
any subsequent payments on such accounts (other than subsequent
payments on returned accounts with respect to which credit or
refund is allowable by reason of section 6416(b)(5)), but
instead--
``(A) there shall be paid an amount equal to the
difference between--
``(i) the tax previously paid on the
payments on such installment accounts, and
``(ii) the total tax which would be payable
if such installment accounts had not been sold
or otherwise disposed of (computed as provided
in paragraph (3)); except that
``(B) if any such sale is pursuant to the order of,
or subject to the approval of, a court of competent
jurisdiction in a bankruptcy or insolvency proceeding,
the amount computed under subparagraph (A) shall not
exceed the sum of the amounts computed by multiplying--
``(i) the proportionate share of the amount
for which such accounts are sold which is
allocable to each unpaid installment payment by
``(ii) the rate of tax under this chapter
in effect on the date such unpaid installment
payment is or was due.
The sum of the amounts payable under this subsection
and subsection (c) in respect of the sale of any
article shall not exceed the total tax.
``(b) 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 5901 in the same manner as if such marijuana were
sold by such producer.
``(c) Application of Tax in Case of Sales by Other Than Producer.--
In case any person acquires from the producer of marijuana, by
operation of law or as a result of any transaction not taxable under
section 5901, the right to sell such marijuana, the sale of such
marijuana by such person shall be taxable under this chapter as if made
by the producer, and such person shall be liable for the tax.
``SEC. 5904. DEFINITIONS.
``For purposes of this chapter--
``(1) Marijuana.--The term `marijuana' has the meaning
given such term by section 102(16) of the Controlled Substances
Act (21 U.S.C. 802).
``(2) Marijuana product.--The term `marijuana product'
means any article which contains marijuana, including an
article which is a concentrate, an edible, a tincture, a
marijuana-infused product, or a topical.
``(3) Producer.--The term `producer' means any person who
plants, cultivates, harvests, or in any way facilitates the
natural growth of, marijuana.
``(4) Manufacturer.--The term `manufacturer' means a person
who manufactures, compounds, converts, processes, prepares, or
packages marijuana or marijuana products.
``(5) Importer.--The term `importer' means--
``(A) any person in the United States to whom
nontaxpaid marijuana products, or any processed
marijuana, manufactured in a foreign country, Puerto
Rico, the Virgin Islands, or a possession of the United
States are shipped or consigned; and
``(B) any person who smuggles or otherwise
unlawfully brings marijuana or marijuana products into
the United States.
``(6) Distributor.--The term `distributor' means a person
who distributes marijuana or marijuana products.
``(7) Retailer.--The term `retailer' means a person who
sells marijuana or marijuana products to consumers.
``(8) Marijuana enterprise.--The term `marijuana
enterprise' means a producer, importer, manufacturer,
distributor, retailer or any person who transports, stores,
displays, or otherwise participates in any business activity
that handles marijuana or marijuana products.
``Subchapter B--Special Provisions Relating to Marijuana Enterprises
``Sec. 5911. Occupational tax.
``Sec. 5912. Application for permit.
``Sec. 5913. Permit.
``Sec. 5914. Inspection of books.
``SEC. 5911. OCCUPATIONAL TAX.
``(a) Imposition of Tax.--There is hereby imposed a special tax to
be paid by each person who is engaged in a marijuana enterprise.
``(b) Amount of Tax.--The amount of the tax imposed under
subsection (a) shall be--
``(1) $1,000 per year in the case of a producer, importer,
or manufacturer, and
``(2) $500 per year in the case of any person engaged in a
marijuana enterprise who is not described in paragraph (1).
``SEC. 5912. APPLICATION FOR PERMIT.
``Every person, before commencing business as a marijuana
enterprise, and at such other time as the Secretary shall by regulation
prescribe, shall make application for the permit provided for in
section 5913. The application shall be in such form as the Secretary
shall prescribe and shall set forth, truthfully and accurately, the
information called for on the form. Such application may be rejected
and the permit denied if the Secretary, after notice and opportunity
for hearing, finds that--
``(1) the premises on which it is proposed to conduct the
business are not adequate to protect the revenue,
``(2) the activity proposed to be carried out at such
premises does not meet such minimum capacity or activity
requirements as the Secretary may prescribe, or
``(3) such person (including, in the case of a corporation,
any officer, director, or principal stockholder and, in the
case of a partnership, a partner)--
``(A) is, by reason of his business experience,
financial standing, 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
products, not likely to maintain operations in
compliance with this chapter,
``(B) has been convicted of a felony violation of
any provision of Federal or State criminal law relating
to marijuana or marijuana products, or
``(C) has failed to disclose any material
information required or made any material false
statement in the application therefor.
``SEC. 5913. PERMIT.
``(a) Issuance.--A person shall not engage in business as a
marijuana enterprise without a permit to engage in such business. Such
permit, conditioned upon compliance with this chapter and regulations
issued thereunder, shall be issued in such form and in such manner as
the Secretary shall by regulation prescribe. A new permit may be
required at such other time as the Secretary shall by regulation
prescribe.
``(b) Suspension or Revocation.--
``(1) Show cause hearing.--If the Secretary has reason to
believe that any person holding a permit--
``(A) has not in good faith complied with this
chapter, or with any other provision of this title
involving intent to defraud,
``(B) has violated the conditions of such permit,
``(C) has failed to disclose any material
information required or made any material false
statement in the application for such permit,
``(D) has failed to maintain his premises in such
manner as to protect the revenue,
``(E) is, by reason of previous or current legal
proceedings involving a felony violation of any other
provision of Federal criminal law relating to
marijuana, not likely to maintain operations in
compliance with this chapter, or
``(F) has been convicted of a felony violation of
any provision of Federal or State criminal law relating
to marijuana or marijuana products,
the Secretary shall issue an order, stating the facts charged,
citing such person to show cause why his permit should not be
suspended or revoked.
``(2) Action following hearing.--If, after hearing, the
Secretary finds that such person has not shown cause why his
permit should not be suspended or revoked, such permit shall be
suspended for such period as the Secretary deems proper or
shall be revoked.
``(c) Information Reporting.--The Secretary may require--
``(1) information reporting by any person issued a permit
under this section, and
``(2) information reporting by such other persons as the
Secretary deems necessary to carry out this chapter.
``(d) Inspection or Disclosure of Information.--For rules relating
to inspection and disclosure of returns and return information, see
section 6103(o).
``SEC. 5914. REGULATIONS.
``The Secretary may issue such regulations or other guidance as the
Secretary determines necessary or appropriate to carry out this
chapter, including the filing of returns under this chapter in
electronic format.
``Subchapter C--Penalties
``Sec. 5921. Civil penalties.
``Sec. 5922. Criminal penalties.
``SEC. 5921. CIVIL PENALTIES.
``(a) Omitting Things Required or Doing Things Forbidden.--Whoever
omits, neglects, or refuses to comply with any duty imposed upon him by
this chapter, or to do, or cause to be done, any of the things required
by this chapter, or does anything prohibited by this chapter, shall in
addition to any other penalty provided in this title, be liable to a
penalty of $1,000, to be recovered, with costs of suit, in a civil
action, except where a penalty under subsection (b) or (c) or under
section 6651 or 6653 or part II of subchapter A of chapter 68 may be
collected from such person by assessment.
``(b) Exception.--No penalty shall be imposed under subsection (a)
if it is shown that there was a reasonable cause and that the taxpayer
acted in good faith.
``(c) Failure To Pay Tax.--Whoever fails to pay any tax imposed by
this chapter at the time prescribed by law or regulations, shall, in
addition to any other penalty provided in this title, be liable to a
penalty of 5 percent of the tax due but unpaid.
``(d) Sale of Marijuana or Marijuana Products for Export.--
``(1) Every person who sells, relands, or receives within
the jurisdiction of the United States any marijuana or
marijuana products which have been labeled or shipped for
exportation under this chapter,
``(2) every person who sells or receives such relanded
marijuana or marijuana products, and
``(3) every person who aids or abets in such selling,
relanding, or receiving,
shall, in addition to the tax and any other penalty provided in this
title, be liable for a penalty equal to the greater of $1,000 or 5
times the amount of the tax imposed by this chapter. All marijuana and
marijuana products relanded within the jurisdiction of the United
States shall be forfeited to the United States and destroyed. All
vessels, vehicles, and aircraft used in such relanding or in removing
such marijuana or marijuana products from the place where relanded,
shall be forfeited to the United States.
``(e) Applicability of Section 6665.--The penalties imposed by
subsections (b) and (c) shall be assessed, collected, and paid in the
same manner as taxes, as provided in section 6665(a).
``(f) Cross References.--For penalty for failure to make deposits
or for overstatement of deposits, see section 6656.
``SEC. 5922. CRIMINAL PENALTIES.
``(a) Fraudulent Offenses.--Whoever, with intent to defraud the
United States--
``(1) 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 thereunder,
``(2) Failing to furnish information or furnishing false
information.--Fails to keep or make any record, return, report,
or inventory, or keeps or makes any false or fraudulent record,
return, report, or inventory, required by this chapter or
regulations thereunder,
``(3) Refusing to pay or evading tax.--Refuses to pay any
tax imposed by this chapter, or attempts in any manner to evade
or defeat the tax or the payment thereof,
``(4) Sales and transfers of marijuana or marijuana
products unlawfully.--Sells or otherwise transfers, contrary to
this chapter or regulations thereunder, any marijuana or
marijuana products subject to tax under this chapter, or
``(5) Taxable event after tax exemption.--With intent to
defraud the United States, purchases, receives, possesses,
offers for sale, or sells or otherwise disposes of, any
marijuana or marijuana product--
``(A) upon which the tax has not been paid or
determined in the manner and at the time prescribed by
this chapter or regulations thereunder, or
``(B) which, without payment of tax pursuant to
section 5902, have been diverted from the applicable
purpose or use specified in that section,
shall, for each such offense, be fined not more than $10,000, or
imprisoned not more than 5 years, or both.
``(b) Other Offenses.--Whoever, otherwise than as provided in
subsection (a), violates any provision of this chapter, or of
regulations prescribed thereunder, shall, for each such offense, be
fined not more than $1,000, or imprisoned not more than 1 year, or
both.
``(c) Liability to Tax.--Any person who possesses marijuana or
marijuana products in violation of subsection (a) shall be liable for a
tax equal to the tax on such articles.''.
(b) Study.--Not later than two years after the date of the
enactment of this Act, and every five years thereafter, the Secretary
of the Treasury shall--
(1) conduct a study concerning the characteristics of the
marijuana industry, including the number of persons operating
marijuana enterprises at each level (e.g., producers,
distributors, manufacturers), the volume of sales, the amount
of tax collected each year, the areas of evasion, and
(2) submit to Congress recommendations to improve the
regulation of the industry and the administration of the
related tax.
(c) Conforming Amendment.--Section 6103(o)(1)(A) of such Code is
amended by striking ``and firearms'' and inserting ``firearms, and
marijuana''.
(d) 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
chapter:
``Chapter 56. Marijuana.''.
(e) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to--
(A) applications for permits under section 5912 of
the Internal Revenue Code of 1986 (as added by
subsection (a)) after the date of the enactment of this
Act, and
(B) sales after December 31, 2013.
(2) 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 law, the
requirements under section 5912 of such Code (as so added)
shall apply beginning on the date that is 6 months after the
date of the enactment of this Act.
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