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Marin Pot Club Operator Says IRS Demands Millions

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A vial of medical marijuana

Marijuana is poured from a jar at at medical marijuana dispensary. (David McNew/Getty Images)

FAIRFAX (CBS / AP) — The founder of a Marin County medical marijuana dispensary says the Internal Revenue Service is demanding millions of dollars in back federal taxes following an audit that disallowed its business expense deductions.

Lynette Shaw of the Marin Alliance for Medical Marijuana said to the Marin Independent Journal the agency based its decision on a tax code provision that blocks such deductions for illegal drug traffickers.

The IRS said it cannot confirm or deny any audits because of disclosure and privacy laws.

Dispensary operators and attorneys say pot clubs across the state are facing similar audits.

Shaw and other dispensary operators say not being able to take business deductions would force them to shut down. She says she plans to fight the audit’s findings.

(Copyright 2011 by CBS San Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. Wire services may have contributed to this report.)

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