IRS may sell seized spectrometers after cleaning marijuana residue

Plain-English summary

Chief Counsel considered whether the IRS could seize and sell laboratory spectrometers used by marijuana-industry taxpayers under Sections 6331 and 6335. The equipment could retain trace marijuana residue from prior use. The advice concluded that the spectrometers were not drug paraphernalia under 21 U.S.C. § 863 because their objective design and likely uses extend to many lawful scientific and investigative purposes. A sale of equipment containing trace residue also would likely not violate 21 U.S.C. § 841(a), but Chief Counsel recommended deep cleaning before sale to remove any criminal-law risk and maximize sale proceeds. Collection should consider cleaning costs when deciding whether to seize and sell the equipment.

Ruling snapshot

• Question: Could the IRS seize and sell marijuana-testing spectrometers that might contain trace residue?
• Outcome: Advice given that seizure and sale were generally permitted, with deep cleaning recommended before sale.
• Key authorities: IRC §§ 6331 and 6335; 21 U.S.C. §§ 841(a) and 863; Posters ‘N’ Things, Ltd. v. United States.

Full text (IRS public release)

ID: CCA_2018042616201420
UILC: 6331.00-00, 6335.00-00

Number: 201820018
Release Date: 5/18/2018
From:
Sent: Thursday, April 26, 2018 4:20:14 PM
To:
Cc:
Bcc:
Subject: RE: marijuana industry collection issue

You requested our views on whether pursuant to I.R.C. §§ 6331 and 6335, the Service
may administratively seize and sell Gas Chromatographer Mass Spectrometers
(GCMS) and Liquid Chromatographer Mass Spectrometers (LCMS) used by taxpayers
involved in the marijuana industry to measure cannabinoids in marijuana. As a result of
the past use of such equipment, there may be marijuana residue remaining on the
equipment seized by the Service. You ask whether such an administrative sale would
violate federal drug paraphernalia law and the provisions of the Controlled Substances
Act related to the intent to distribute controlled substances.

We conclude that GCMSs and LCMSs are not drug paraphernalia under the Drug
Paraphernalia Statute, 21 U.S.C. § 863, and so there are generally no restrictions on
seizure and sale of such items. The statute, which makes it unlawful to sell drug
paraphernalia, generally defines drug paraphernalia as “any equipment, product, or
material of any kind which is primarily intended or designed for use in manufacturing,
compounding, converting, concealing, producing, processing, preparing, injecting,
ingesting, inhaling, or otherwise introducing into the human body a controlled
substance, possession of which is unlawful under this subchapter. “ 21 U.S.C.
§ 863(d).

In Posters ‘N’ Things, Ltd. v. United States, 511 U.S. 513 (1994) the Supreme Court
examined both the “primarily intended for use” and “primarily designed for use”
phrases in the predecessor of section 863(d). The court held that the provision
“establishes objective standards for determining what constitutes drug
paraphernalia.” 511 U.S. 517. With regard to the “designed for use” prong, the Court
stated that the standard referred to the design of the manufacturer, not the intent of the
retailer or customer. See also Hoffman Estates v. Flipside, Hoffman Estates, Inc., 455
U.S. 489 (1982). Similarly, the Court concluded that the term “primarily intended for
use” refers generally to an item's likely use rather than the defendant’s state of
mind. Id. at 519.

In light of the Supreme Court’s reasoning, we conclude that, by any objective standard,
GCMSs and LCMSs are not “equipment . . . primarily intended or designed for use in

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manufacturing, compounding, converting, concealing, producing, processing, preparing
. . . a controlled substance.” Employing different processes, GCMSs and LCMSs are
used to analyze organic material. While they can be used by those in the drug trade,
they are also used in drug detection, and many other areas including airport
inspections, fire investigations, explosives investigations, environmental analysis,
agrichemical analysis, and identification of foreign material collected from outer
space. Not only do they not qualify as drug paraphernalia under any objective criteria,
they are not listed and are not at all similar to the items that are specifically listed in
section 863(d), and none of the factors in section 863(e) alter our analysis.

You are also concerned that an administrative sale of spectrometers is prohibited
because the devices might contain traces of marijuana residue. The administrative
seizure and sale of LCMSs and GCMSs containing trace amounts of residue would
likely not violate section 841(a) of Title 21, which states that:

   it shall be unlawful for any person knowingly or intentionally—
   (1) to manufacture, distribute, or dispense, or possess with intent to manufacture,
   distribute, or dispense, a controlled substance; or
   (2) to create, distribute, or dispense, or possess with intent to distribute or
   dispense, a counterfeit substance.

21 U.S.C. § 841(a). Arguably, a mere residual amount of a controlled substance
suggests the absence of the intent to distribute.

In any case, to avoid any possibility of a criminal violation, the LCMs and GCMs should
be subject to a deep cleaning prior to sale to reduce all trace residues. This will also
have the beneficial purpose of increasing the bid prices at a public sale held under
section 6335. These particular devices are highly specialized, and they should be
inspected and cleaned to ensure that they are in the best possible condition for sale as
that would maximize the value and, correspondingly, the proceeds generated. In
deciding whether to seize and sell equipment such as LCMSs and GCMSs, Collection
should take the costs of cleaning the equipment into consideration.
If you would like to discuss this further, please let me know.