Marijuana Tax Equity Act – the Blumenauer Huse Bill

http://blumenauer.house.gov/images/stories/2013/Marijuana_Tax_Equity_Act.pdf

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Puff, Puff, Pass

……………………………………………………………
(Original Signature of Member)

113TH CONGRESS
1ST SESSION

H. R. ll
To amend the Internal Revenue Code of 1986 to provide for the taxation
of marijuana, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

Mr. BLUMENAUER introduced the following bill; which was referred to the
Committee on llllllllllllll

A BILL

To amend the Internal Revenue Code of 1986 to provide
for the taxation of marijuana, and for other purposes.

1
Be it enacted by the Senate and House of Representa2
tives of the United States of America in Congress assembled,
3
SECTION 1. SHORT TITLE.
4

This Act may be cited as the ‘‘Marijuana Tax Equity
5
Act of 2013’’.
6
SEC. 2. TAXATION RELATING TO MARIJUANA.
7

(a) IN GENERAL.—Subtitle E of title I of the Inter8
nal Revenue Code of 1986 is amended by adding at the
9
end the following new chapter:
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1

‘‘CHAPTER 56—MARIJUANA

‘‘SUBCHAPTER A. PRODUCER TAX.

‘‘SUBCHAPTER B. SPECIAL PROVISIONS RELATING TO MARIJUANA
ENTERPRISES.

‘‘SUBCHAPTER C. PENALTIES.

2

‘‘Subchapter A—Producer Tax

‘‘Sec. 5901. Imposition of tax.
‘‘Sec. 5902. Exemption from tax.
‘‘Sec. 5903. Special rules.
‘‘Sec. 5904. Definitions.

3
‘‘SEC. 5901. IMPOSITION OF TAX.
4
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed
5
a tax on the sale of marijuana by the producer or importer
6
thereof.
7
‘‘(b) AMOUNT OF TAX.—The amount of the tax im8
posed by subsection (a) shall be 50 percent of the price
9
for which so sold.

10
‘‘SEC. 5902. EXEMPTION FROM TAX.
11
‘‘(a) GENERAL RULE.—Under regulations prescribed
12
by the Secretary, no tax shall be imposed under this sub13
chapter on the sale by the producer or importer of an arti14
cle—
15
‘‘(1) for use by the purchaser for further pro16

duction, or for resale by the purchaser to a second

17

purchaser for use by such second purchaser in fur

18

ther production, or

19

‘‘(2) for export, or for resale by the purchaser

20

to a second purchaser for export.

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1
‘‘(b) PROOF OF RESALE FOR FURTHER PRODUC2
TION; PROOF OF EXPORT.—Where an article has been
3
sold free of tax under subsection (a)—
4
‘‘(1) for resale by the purchaser to a second
5
purchaser for use by such second purchaser in fur6
ther production, or
7
‘‘(2) for export, or for resale by the purchaser
8
to a second purchaser for export,
9
subsection (a) shall cease to apply in respect of such sale
10
of such article unless, within the 6-month period which
11
begins on the date of the sale by the producer or importer
12
(or, if earlier, on the date of shipment by the producer
13
or importer), the producer or importer receives proof that
14
the article has been exported or resold for use in further
15
production.
16
‘‘(c) PRODUCER OR IMPORTER RELIEVED FROM LI17
ABILITY IN CERTAIN CASES.—In the case of any article
18
sold free of tax under this section (other than a sale to
19
which subsection (b) applies), if the producer or importer
20
in good faith accepts a certification by the purchaser that
21
the article will be used in accordance with the applicable
22
provisions of law, no tax shall thereafter be imposed under
23
this chapter in respect of such sale by such producer or
24
importer.

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1
‘‘(d) EXPORT.—For purposes of this section, the
2
term ‘export’ includes shipment to a possession of the
3
United States; and the term ‘exported’ includes shipped
4
to a possession of the United States.
‘‘(e) USE IN FURTHER PRODUCTION.—An article
6
shall be treated as sold for use in further production if
7
such article is sold for use by the purchaser for further
8
planting, cultivating, or harvesting.
9
‘‘(f) FURTHER PRODUCER LIABLE FOR TAX.—For
purposes of this chapter, a producer to whom an article
11
is sold or resold free of tax under subsection (a)(1) for
12
use by him in further production shall be treated as the
13
producer of such article.
14
‘‘SEC. 5903. SPECIAL RULES.
‘‘(a) DEFINITION OF PRICE.—For purposes of this
16
chapter—
17
‘‘(1) CONTAINERS, PACKING AND TRANSPOR18
TATION CHARGES.—In determining, for the purposes
19
of this chapter, the price for which an article is sold,
there shall be included any charge for coverings and
21
containers of whatever nature, and any charge inci22
dent to placing the article in condition packed ready
23
for shipment, but there shall be excluded the amount
24
of tax imposed by this chapter, whether or not stated
as a separate charge. A transportation, delivery,

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1
insurance, installation, or other charge (not required
2
by the foregoing sentence to be included) shall be ex3
cluded from the price only if the amount thereof is
4
established to the satisfaction of the Secretary in accordance
with regulations.
6
‘‘(2) CONSTRUCTIVE SALE PRICE.—
7
‘‘(A) IN GENERAL.—If an article is sold at
8
retail, sold on consignment, or sold (otherwise
9
than through an arm’s length transaction) at
less than the fair market price, the tax under
11
section 5901 shall be computed on the price for
12
which such articles are sold, in the ordinary
13
course of trade, by producers thereof, as deter14
mined by the Secretary. In the case of an article
sold at retail, the computation under the
16
preceding sentence shall be on whichever of the
17
following prices is the lower:
18
‘‘(i) the price for which such article is
19
sold, or
‘‘(ii) the highest price for which such
21
articles are sold to manufacturers, in the
22
ordinary course of trade, by producers
23
thereof, as determined by the Secretary.
24
This paragraph shall not apply if subparagraph
(B) applies.

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1
‘‘(B) SPECIAL RULE.—If an article is sold
2
at retail or to a retailer, and if—
3
‘‘(i) the producer or importer of such
4
article regularly sells such articles at retail
5
or to retailers, as the case may be,
6
‘‘(ii) the producer or importer of such
7
article regularly sells such articles to one
8
or more manufacturers in arm’s length
9
transactions and he establishes that his
10
prices in such cases are determined with11
out regard to any tax benefit under this
12
paragraph, and
13
‘‘(iii) the transaction is an arm’s
14
length transaction,
15
the tax under this chapter shall (if based on the
16
price for which the article is sold) be computed
17
under subparagraph (C)
18
‘‘(C) PRICE FOR PURPOSES OF SPECIAL
19
RULE.—The price computed under this sub20
paragraph is whichever of the following prices is
21
the lower:
22
‘‘(i) the price for which such article is
23
sold, or

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1
‘‘(ii) the highest price for which such
2
articles are sold by such producer, or im3
porter to manufacturers.
4
‘‘(D) DEFINITION OF LOWEST PRICE.—
For purposes of subparagraphs (A) and (C),
6
the lowest price shall be determined—
7
‘‘(i) without requiring that any given
8
percentage of sales be made at that price,
9
and
‘‘(ii) without including any fixed
11
amount to which the purchaser has a right
12
as a result of contractual arrangements ex13
isting at the time of the sale.
14
‘‘(E) ARM’S LENGTH.—
‘‘(i) IN GENERAL.—For purposes of
16
this section, a sale is considered to be
17
made under circumstances otherwise than
18
at arm’s length if—
19
‘‘(I) the parties are members of
the same controlled group, whether or
21
not such control is actually exercised
22
to influence the sale price, or
23
‘‘(II) the sale is made pursuant
24
to special arrangements between a
manufacturer and a purchaser.

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1
‘‘(ii) CONTROLLED GROUPS.—
2
‘‘(I) IN GENERAL.—The term
3
‘controlled group’ has the meaning
4
given to such term by subsection (a)
5
of section 1563, except that ‘more
6
than 50 percent’ shall be substituted
7
for ‘at least 80 percent’ each place it
8
appears in such subsection.
9
‘‘(II) CONTROLLED GROUPS
10
WHICH INCLUDE NONINCORPORATED
11
PERSONS.—Under regulations pre12
scribed by the Secretary, principles
13
similar to the principles of subclause
14
(I) shall apply to a group of persons
15
under common control where 1 or
16
more of such persons is not a corpora17
tion.
18
‘‘(3) PARTIAL PAYMENTS.—In the case of—
19
‘‘(A) a contract for the sale of an article
20
wherein it is provided that the price shall be
21
paid by installments and title to the article sold
22
does not pass until a future date notwith23
standing partial payment by installments,
24
‘‘(B) a conditional sale, or

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‘‘(C) a chattel mortgage arrangement
2
wherein it is provided that the sales price shall
3
be paid in installments,
4
there shall be paid upon each payment with respect
5
to the article a percentage of such payment equal to
6
the rate of tax in effect on the date such payment
7
is due.
8
‘‘(4) SALES OF INSTALLMENT ACCOUNTS.—If
9
installment accounts, with respect to payments on
10
which tax is being computed as provided in para11
graph (3), are sold or otherwise disposed of, then
12
paragraph (3) shall not apply with respect to any
13
subsequent payments on such accounts (other than
14
subsequent payments on returned accounts with re15
spect to which credit or refund is allowable by rea16
son of section 6416(b)(5)), but instead—
17
‘‘(A) there shall be paid an amount equal
18
to the difference between—
19
‘‘(i) the tax previously paid on the
20
payments on such installment accounts,
21
and
22
‘‘(ii) the total tax which would be pay23
able if such installment accounts had not
24
been sold or otherwise disposed of (com

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1
puted as provided in paragraph (3)); ex2
cept that
3
‘‘(B) if any such sale is pursuant to the
4
order of, or subject to the approval of, a court
of competent jurisdiction in a bankruptcy or in6
solvency proceeding, the amount computed
7
under subparagraph (A) shall not exceed the
8
sum of the amounts computed by multiplying—
9
‘‘(i) the proportionate share of the
amount for which such accounts are sold
11
which is allocable to each unpaid install12
ment payment by
13
‘‘(ii) the rate of tax under this chap14
ter in effect on the date such unpaid installment
payment is or was due.
16
The sum of the amounts payable under this
17
subsection and subsection (c) in respect of the
18
sale of any article shall not exceed the total tax.
19
‘‘(b) CERTAIN USES TREATED AS SALES.—Any producer
of marijuana which uses such marijuana before it
21
is sold shall be liable for the tax imposed by section 5901
22
in the same manner as if such marijuana were sold by
23
such producer.
24
‘‘(c) APPLICATION OF TAX IN CASE OF SALES BY
OTHER THAN PRODUCER.—In case any person acquires

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1
from the producer of marijuana, by operation of law or
2
as a result of any transaction not taxable under section
3
5901, the right to sell such marijuana, the sale of such
4
marijuana by such person shall be taxable under this
5
chapter as if made by the producer, and such person shall
6
be liable for the tax.
7
‘‘SEC. 5904. DEFINITIONS.
8
‘‘For purposes of this chapter—
9
‘‘(1) MARIJUANA.—The term ‘marijuana’ has
10
the meaning given such term by section 102(16) of
11
the Controlled Substances Act (21 U.S.C. 802).
12
‘‘(2) MARIJUANA PRODUCT.—The term ‘mari13
juana product’ means any article which contains
14
marijuana, including an article which is a con15
centrate, an edible, a tincture, a marijuana-infused
16
product, or a topical.
17
‘‘(3) PRODUCER.—The term ‘producer’ means
18
any person who plants, cultivates, harvests, or in
19
any way facilitates the natural growth of, marijuana.
20
‘‘(4) MANUFACTURER.—The term ‘manufac21
turer’ means a person who manufactures, com22
pounds, converts, processes, prepares, or packages
23
marijuana or marijuana products.
24
‘‘(5) IMPORTER.—The term ‘importer’ means—

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1
‘‘(A) any person in the United States to
2
whom nontaxpaid marijuana products, or any
3
processed marijuana, manufactured in a foreign
4
country, Puerto Rico, the Virgin Islands, or a
5
possession of the United States are shipped or
6
consigned; and
7
‘‘(B) any person who smuggles or other8
wise unlawfully brings marijuana or marijuana
9
products into the United States.
10
‘‘(6) DISTRIBUTOR.—The term ‘distributor’
11
means a person who distributes marijuana or mari12
juana products.
13
‘‘(7) RETAILER.—The term ‘retailer’ means a
14
person who sells marijuana or marijuana products to
15
consumers.
16
‘‘(8) MARIJUANA ENTERPRISE.—The term
17
‘marijuana enterprise’ means a producer, importer,
18
manufacturer, distributor, retailer or any person
19
who transports, stores, displays, or otherwise partici20
pates in any business activity that handles mari21
juana or marijuana products.
22
‘‘Subchapter B—Special Provisions Relating
23
to Marijuana Enterprises
‘‘Sec. 5911. Occupational tax.
‘‘Sec. 5912. Application for permit.
‘‘Sec. 5913. Permit.
‘‘Sec. 5914. Inspection of books.

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‘‘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

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or activity requirements as the Secretary may pre2
scribe, or
3
‘‘(3) such person (including, in the case of a
4
corporation, any officer, director, or principal stockholder
and, in the case of a partnership, a part6
ner)—
7
‘‘(A) is, by reason of his business experi8
ence, financial standing, or trade connections or
9
by reason of previous or current legal proceedings
involving a felony violation of any
11
other provision of Federal criminal law relating
12
to marijuana or marijuana products, not likely
13
to maintain operations in compliance with this
14
chapter,
‘‘(B) has been convicted of a felony viola16
tion of any provision of Federal or State crimi17
nal law relating to marijuana or marijuana
18
products, or
19
‘‘(C) has failed to disclose any material information
required or made any material false
21
statement in the application therefor.
22
‘‘SEC. 5913. PERMIT.
23
‘‘(a) ISSUANCE.—A person shall not engage in busi24
ness as a marijuana enterprise without a permit to engage
in such business. Such permit, conditioned upon compli

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ance with this chapter and regulations issued thereunder,
2
shall be issued in such form and in such manner as the
3
Secretary shall by regulation prescribe. A new permit may
4
be required at such other time as the Secretary shall by
5
regulation prescribe.
6
‘‘(b) SUSPENSION OR REVOCATION.—
7
‘‘(1) SHOW CAUSE HEARING.—If the Secretary
8
has reason to believe that any person holding a per9
mit—
10
‘‘(A) has not in good faith complied with
11
this chapter, or with any other provision of this
12
title involving intent to defraud,
13
‘‘(B) has violated the conditions of such
14
permit,
15
‘‘(C) has failed to disclose any material in16
formation required or made any material false
17
statement in the application for such permit,
18
‘‘(D) has failed to maintain his premises in
19
such manner as to protect the revenue,
20
‘‘(E) is, by reason of previous or current
21
legal proceedings involving a felony violation of
22
any other provision of Federal criminal law re23
lating to marijuana, not likely to maintain oper24
ations in compliance with this chapter, or

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‘‘(F) has been convicted of a felony viola2
tion of any provision of Federal or State crimi3
nal law relating to marijuana or marijuana
4
products,
5
the Secretary shall issue an order, stating the facts
6
charged, citing such person to show cause why his
7
permit should not be suspended or revoked.
8
‘‘(2) ACTION FOLLOWING HEARING.—If, after
9
hearing, the Secretary finds that such person has
10
not shown cause why his permit should not be sus11
pended or revoked, such permit shall be suspended
12
for such period as the Secretary deems proper or
13
shall be revoked.
14
‘‘(c) INFORMATION REPORTING.—The Secretary may
15
require—
16
‘‘(1) information reporting by any person issued
17
a permit under this section, and
18
‘‘(2) information reporting by such other per19
sons as the Secretary deems necessary to carry out
20
this chapter.
21
‘‘(d) INSPECTION OR DISCLOSURE OF INFORMA22
TION.—For rules relating to inspection and disclosure of
23
returns and return information, see section 6103(o).

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‘‘SEC. 5914. REGULATIONS.
2
‘‘The Secretary may issue such regulations or other
3
guidance as the Secretary determines necessary or appro4
priate to carry out this chapter, including the filing of re5
turns under this chapter in electronic format.
6
‘‘Subchapter C—Penalties
‘‘Sec. 5921. Civil penalties.
‘‘Sec. 5922. Criminal penalties.
7
‘‘SEC. 5921. CIVIL PENALTIES.
8
‘‘(a) OMITTING THINGS REQUIRED OR DOING
9
THINGS FORBIDDEN.—Whoever omits, neglects, or re10
fuses to comply with any duty imposed upon him by this
11
chapter, or to do, or cause to be done, any of the things
12
required by this chapter, or does anything prohibited by
13
this chapter, shall in addition to any other penalty pro14
vided in this title, be liable to a penalty of $1,000, to be
15
recovered, with costs of suit, in a civil action, except where
16
a penalty under subsection (b) or (c) or under section
17
6651 or 6653 or part II of subchapter A of chapter 68
18
may be collected from such person by assessment.
19
‘‘(b) EXCEPTION.—No penalty shall be imposed
20
under subsection (a) if it is shown that there was a reason21
able cause and that the taxpayer acted in good faith.
22
‘‘(c) FAILURE TO PAY TAX.—Whoever fails to pay
23
any tax imposed by this chapter at the time prescribed
24
by law or regulations, shall, in addition to any other pen-

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alty provided in this title, be liable to a penalty of 5 per2
cent of the tax due but unpaid.
3
‘‘(d) SALE OF MARIJUANA OR MARIJUANA PROD4
UCTS FOR EXPORT.—
‘‘(1) Every person who sells, relands, or receives
6
within the jurisdiction of the United States any
7
marijuana or marijuana products which have been
8
labeled or shipped for exportation under this chap9
ter,
‘‘(2) every person who sells or receives such re11
landed marijuana or marijuana products, and
12
‘‘(3) every person who aids or abets in such
13
selling, relanding, or receiving,
14
shall, in addition to the tax and any other penalty provided
in this title, be liable for a penalty equal to the greater
16
of $1,000 or 5 times the amount of the tax imposed by
17
this chapter. All marijuana and marijuana products re18
landed within the jurisdiction of the United States shall
19
be forfeited to the United States and destroyed. All vessels,
vehicles, and aircraft used in such relanding or in
21
removing such marijuana or marijuana products from the
22
place where relanded, shall be forfeited to the United
23
States.
24
‘‘(e) APPLICABILITY OF SECTION 6665.—The penalties
imposed by subsections (b) and (c) shall be assessed,

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1
collected, and paid in the same manner as taxes, as pro2
vided in section 6665(a).
3
‘‘(f) CROSS REFERENCES.—For penalty for failure to
4
make deposits or for overstatement of deposits, see section
6656.
6
‘‘SEC. 5922. CRIMINAL PENALTIES.
7
‘‘(a) FRAUDULENT OFFENSES.—Whoever, with in8
tent to defraud the United States—
9
‘‘(1) ENGAGING IN BUSINESS UNLAWFULLY.—
Engages in business as a marijuana enterprise with11
out filing the application and obtaining the permit
12
where required by this chapter or regulations there13
under,
14
‘‘(2) FAILING TO FURNISH INFORMATION OR
FURNISHING FALSE INFORMATION.—Fails to keep or
16
make any record, return, report, or inventory, or
17
keeps or makes any false or fraudulent record, re18
turn, report, or inventory, required by this chapter
19
or regulations thereunder,
‘‘(3) REFUSING TO PAY OR EVADING TAX.—Re21
fuses to pay any tax imposed by this chapter, or at22
tempts in any manner to evade or defeat the tax or
23
the payment thereof,
24
‘‘(4) SALES AND TRANSFERS OF MARIJUANA OR
MARIJUANA PRODUCTS UNLAWFULLY.—Sells or oth

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1
erwise transfers, contrary to this chapter or regula2
tions thereunder, any marijuana or marijuana prod3
ucts subject to tax under this chapter, or
4
‘‘(5) TAXABLE EVENT AFTER TAX EXEMP-
TION.—with intent to defraud the United States,
6
purchases, receives, possesses, offers for sale, or sells
7
or otherwise disposes of, any marijuana or mari8
juana product—
9
‘‘(A) upon which the tax has not been paid
or determined in the manner and at the time
11
prescribed by this chapter or regulations there12
under, or
13
‘‘(B) which, without payment of tax pursu14
ant to section 5902, have been diverted from
the applicable purpose or use specified in that
16
section,
17
shall, for each such offense, be fined not more than
18
$10,000, or imprisoned not more than 5 years, or both.
19
‘‘(b) OTHER OFFENSES.—Whoever, otherwise than
as provided in subsection (a), violates any provision of this
21
chapter, or of regulations prescribed thereunder, shall, for
22
each such offense, be fined not more than $1,000, or im23
prisoned not more than 1 year, or both.
24
‘‘(c) LIABILITY TO TAX.—Any person who possesses
marijuana or marijuana products in violation of subsection

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F:\M13\BLUMEN\BLUMEN_011.XML

21
1
(a) shall be liable for a tax equal to the tax on such arti2
cles.’’.
3
(b) STUDY.—Not later than two years after the date
4
of the enactment of this Act, and every five years thereafter,
the Secretary of the Treasury shall—
6
(1) conduct a study concerning the characteris7
tics of the marijuana industry, including the number
8
of persons operating marijuana enterprises at each
9
level (e.g., producers, distributors, manufacturers),
the volume of sales, the amount of tax collected each
11
year, the areas of evasion, and
12
(2) submit to Congress recommendations to im13
prove the regulation of the industry and the admin14
istration of the related tax.
(c) CONFORMING AMENDMENT.—Section
16
6103(o)(1)(A) of such Code is amended by striking ‘‘and
17
firearms’’ and inserting ‘‘firearms, and marijuana’’.
18
(d) CLERICAL AMENDMENT.—The table of chapters
19
for subtitle E of title I of such Code is amended by adding
at the end the following new chapter:
‘‘CHAPTER 56. MARIJUANA.’’.
21
(e) EFFECTIVE DATE.—
22
(1) IN GENERAL.—The amendments made by
23
this section shall apply to—
24
(A) applications for permits under section
5912 of the Internal Revenue Code of 1986 (as

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F:\M13\BLUMEN\BLUMEN_011.XML

22

1
added by subsection (a)) after the date of the
2
enactment of this Act, and
3
(B) sales after December 31, 2013.
4
(2) SPECIAL RULES FOR EXISTING BUSI5
NESSES.—In the case of any producer operating
6
under a permit issued on or before the date of the
7
enactment of this Act under State law, the require8
ments under section 5912 of such Code (as so
9
added) shall apply beginning on the date that is 6
10
months after the date of the enactment of this Act.

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About fiftystatebanana

Obscurity is eternal.
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