In our last installment, we discussed the reasons why Oregon’s cannabis sales tax should not apply to cannabis seeds. So what do you do if you believe that a retailer wrongfully charged you sales tax on seeds or any other cannabis item? There’s a law for that!
Oregon Revised Statute (ORS) 475B.740 requires that cannabis retailers return taxes imposed on a sale that is not taxable upon written notice from the Oregon Department of Revenue (ODOR). The relevant ORS on the refund process is not clear or easy to follow. However, the Oregon Legislature granted ODOR broad authority to establish rules and procedures regarding the cannabis sales tax — and it did just that.
ODOR created Oregon Administrative Rule (OAR) 150-475-2060, which provides the relevant how-to of the specific process a consumer must follow for obtaining a refund of excess taxes paid, as follows:
- Within 30 days from date of sale, the consumer requests a refund in writing to the retailer by mail or hand delivery. The request must include the retailers (i) name, (ii) the nature of the excess tax paid, (iii) the remedy requested, and (iv) the receipt clearly identifying the date of purchase and proof of payment.
- If within 60 days of the request the retailer does not return the excess tax paid, then the consumer may appeal to ODOR within 120 days of the date of the original request for a refund.
- ODOR must refund excess cannabis sales taxes upon satisfactory proof that (a) the consumer paid an excess tax to the retailer, (b) the excess tax was not refunded, and (c) the consumer made a timely request for a refund.
One small problem: ODOR believes the sales tax equally applies to seeds and immature plants, (i.e., ODOR concluded the sales tax on seeds is legal). So don’t hold your breath waiting for ODOR to voluntarily send you a check.
Once you’ve exhausted these options, you are left with the Oregon Tax Court. The Tax Court is the sole, exclusive, and final judicial authority for questions of law and fact in Oregon. The Tax Court is broken into two separate divisions — the magistrate and the regular divisions. Cases typically start at the magistrate division and may later be appealed to the regular division. A taxpayer that is unhappy with a regular division decision may appeal to the Oregon Supreme Court.
A taxpayer appeals the failure of ODOR to issue a refund by filing a complaint against ODOR with the Tax Court no later than 90 days following the decision to deny the request for refund. With any luck, the Tax Court will agree with our position that the cannabis sales tax does not apply to seeds. As the saying goes, there are only two certainties in life — death and taxes.
One more thing. Even if you win, you’ve probably lost. ORS 305.490 requires that taxpayers pay a filing fee for each complaint or petition. The current filing fee is $265. The statute also provides for the recovery of costs and reasonable attorney’s fees in limited circumstances. However, those circumstances are generally limited to situations involving an individual’s request for a refund for a tax measured on net income and property tax matters. Costs and reasonable attorney’s fees are not recoverable in sales tax matters.
Takeaway for Consumers
ODOR probably got it wrong in concluding that the cannabis sales tax applies to cannabis seeds. Anticipating a challenge to their weak position, ODOR has created a number of onerous obstacles for anyone willing to challenge their authority. Fighting ODOR on this issue is probably not worth the cost. A consumer spending $100 on seeds this spring will generally pay $20 in sales tax. Getting that sales tax refunded requires that you jump through the hoops noted above. If the retailer and ODOR refuse to make the refund, then you’re stuck paying $265 to recover $20 — creating a loss of at least $245, because the $265 cannot be recovered under current law. This doesn’t begin to account for the time and effort involved jumping through all of these hoops. The only way we’ll ever know if ODOR got it wrong is if someone is willing to take up the fight on principal. Even then, a win in Tax Court probably means the Oregon Legislature will “fix” the law in a future legislative session. If this happens, we can only hope that the Legislature will be kind enough to expand recovery of costs and reasonable attorney’s fees to sales tax matters.
Takeaway for Seed Retailers
Be wary of refunding any taxes to your customers because you can be held liable for not collecting and remitting the tax.