I GOT STONED AND I MISSED IT! Marijuana Dispensaries Lose $2M IRS Case Due To Fed Ex Delivery Snafu, 9th Circuit Finds (A Friday Night Cautionary Tale)

The 9th Circuit harshed everyone's mellow today, when it ruled that a chain of marijuana dispensaries lost out on its tax appeal of a $2M IRS bill because Fed Ex did not deliver the appeal the next day. The chain of unfortunate circumstances was even longer, but none of them changed the legal outcome.

Even Judge Daniel Collins seemed to feel a bit down, opening the unanimous opinion by saying "This unhappy case presents a cautionary tale about the need for lawyers to ensure that they have done exactly what is statutorily required to invoke a court’s jurisdiction."

In fact, the rest of that opening paragraph is also worth reading:

The unusual Internal Revenue Code (“I.R.C.”) provision at issue

here allows taxpayers to benefit from a “mailbox” rule—i.e.,

that a document will be deemed filed when dispatched—

only if the taxpayer uses one of the particular delivery

services that the Internal Revenue Service (“IRS”) has

specifically designated for that purpose in a published

notice. In preparing two Tax Court petitions for filing, the

attorneys here delegated the task of arranging delivery to a

secretary who, unfortunately, selected an overnight delivery

service that was not then on the published list (it was added

two weeks later). The error would not have mattered if the

petitions had nonetheless arrived the next day, but as it

turned out, they were not received by the Tax Court until two

days after being dropped off at a FedEx office in California.

Because the Tax Court concluded that the petitions had not

been timely received and that the mailbox rule did not apply,

it dismissed the petitions for lack of jurisdiction. Finding no

error, we affirm.

That's right. The secretary chose FedEx First Overnight delivery. FedEx did not deliver it to the Tax Court in Washington, D.C. on the deadline day - they indicated that the driver was somehow unable to reach the Tax Court's door because of police action, construction, or something. FedEx created a new shipping label and delivered it the next day.

The IRS - in a surprise to probably noone - waited 15 months to move to dismiss the appeal as untimely filed. To make matters even more harsh, the IRS approved FedEx First Overnight as an approved courier service two weeks after the delivery snafu; if the approval was 15 days earlier, the appeal would have been marked as timely!

Nevertheless, the 9th Circuit found no basis for allowing the dispensaries' appeal, and the $2M tax determination stands.

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(Yes, this was just an elaborate excuse to post that song from my youth.😜 )

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(Photo courtesy @KahnTaxLaw)