TRD News:

ALBUQUERQUE – The New Mexico Tax and Revenue Department appealed a Jan. 28, Court of Appeals decision that would have allowed medical cannabis to receive a deduction from New Mexico Gross Receipts Tax (NMGRT) as a prescription drug.

Currently, sales tax on medical cannabis in New Mexico averages about 8 percent and approximately $10.5 million was remitted in 2019 by the 34 licensed cannabis producers.

Prescription drugs are exempt from sales taxes in nearly every state. Most neighboring states, including Colorado, Nevada, Utah and Texas, have provided similar relief to cannabis patients by extending the tax exemption to medical cannabis sales. Illinois applies a 1 percent pharmaceutical sales tax on all prescription drugs including medical cannabis.

In 2014, a New Mexico licensed cannabis provider filed for a refund for NMGRT paid on medical cannabis sales. The Tax and Revenue Department denied the provider’s claim, which then took the case to the Court of Appeals of New Mexico.

The Court of Appeals reversed the Tax and Revenue Department’s decision and found that allowing the statutory deduction to receipts on the sale of medical cannabis “best achieves this legislative purpose” in reference to both the Lynn and Erin Compassionate Use Act and the statutory deduction for prescription drugs.

“To paraphrase, the Compassionate Use Act was intended to make medical [cannabis] accessible to those with debilitating medical conditions who might benefit from the use thereof,” Judge M. Monica Zomara stated in the Court of Appeals opinion. “It is reasonably self-evident that the deduction from gross receipts for prescription drugs was similarly intended to make medical treatment more accessible, by lessening the expense to those who require it. These statutes should be read harmoniously, to give effect to their commonality of purpose.”

The Court of Appeals decision appears consistent with Gov. Michelle Lujan Grisham’s recent health initiatives to reduce prescription drug costs.

“My goal is to make health care so much more cost-effective and affordable for New Mexicans,” Gov. Lujan Grisham said at a bill signing ceremony on March 4, 2020 in Santa Fe.

Now, the Tax and Revenue Department is appealing the Court of Appeals ruling to the highest court in the state. The state Supreme Court may choose to reach a final decision but is not bound by a specific time frame to decide whether it will hear the case.

“Access to medical treatment and therefore medicine should not incur unfair added burdens that prevent any person from receiving care,” said CEO and President of Ultra Health Duke Rodriguez. “Medical cannabis is a valid form of medical treatment, and we agree with the decision made by the Court of Appeals. There is universal agreement that we should never tax basic human needs like medicine or food. Cannabis is medicine.”