Martin Nickerson, Jr.,appellant v. Wa State Dept Of Revenue, 48702-1

Background

In 2011 Washington adopted MUCA allowing noncommercial collective gardens for medical cannabis; legislature vetoed explicit retail-sale provisions. DOR issued guidance that medical marijuana sales are subject to retail sales and B&O taxes.
Nickerson registered businesses (Northern Cross; Northern Cross Collective Gardens), indicated retail activity, but never filed returns or paid taxes. DOR assessed taxes for 2011–2013, issued warrants, obtained judgments and garnished funds.
Nickerson was criminally charged in state court for delivery/possession with intent to deliver and maintaining a place for controlled substances.
He sued DOR seeking declaratory relief and an injunction against tax collection, arguing (1) the federal Controlled Substances Act (CSA) preempts state taxation (Supremacy Clause), and (2) filing returns/paying taxes would violate his Fifth Amendment right against self-incrimination.
The trial court granted summary judgment to DOR and denied Nickerson’s motion. The Court of Appeals affirmed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the CSA preempts Washington’s retail sales and B&O taxes on medical marijuana sales	Nickerson: CSA preempts or conflicts with state taxation of medical marijuana so tax collection is barred under the Supremacy Clause	DOR: CSA’s §903 preserves state laws absent a positive conflict; taxation does not make compliance with CSA impossible or frustrate its purposes	Court: No preemption — taxes do not create impossibility or an obstacle to CSA objectives; §903 requires a positive conflict not shown
Whether paying taxes or filing combined excise returns forces self-incrimination under the Fifth Amendment	Nickerson: reporting gross receipts and registration links him to illegal sales and could be used in prosecution	DOR: tax returns are generally applicable, do not require disclosure of illicit activity, and do not compel testimonial incriminating facts	Court: No Fifth Amendment violation — returns request sales totals and non-testimonial data; no real and appreciable risk of self-incrimination
Whether impossibility preemption applies (cannot comply with both laws)	Nickerson: Paying taxes would conflict with federal prohibition	DOR: State law does not compel illegal conduct; payment/filing does not violate federal law	Court: Impossibility preemption fails — state tax compliance does not force violation of CSA
Whether obstacle preemption applies (state law frustrates federal objectives)	Nickerson: Taxation converts noncommercial collective activity into commercial, undermining CSA’s regulation of supply and distribution	DOR: Taxing after-the-fact distributions does not promote or facilitate drug market nor impede federal enforcement	Court: Obstacle preemption fails — taxation does not frustrate CSA’s supply/distribution control goals

Key Cases Cited

Wyeth v. Levine, 555 U.S. 555 (presumption against federal preemption of state police powers)
Gonzales v. Raich, 545 U.S. 1 (CSA’s purpose: control supply and demand; regulation of distribution/possession)
Gonzales v. Oregon, 546 U.S. 243 (discussion of CSA regulatory regime)
Dep’t of Revenue of Mont. v. Kurth Ranch, 511 U.S. 767 (states may tax illegal activity)
United States v. Sullivan, 274 U.S. 259 (income reporting from illegal sources does not per se invoke Fifth Amendment)
Marchetti v. United States, 390 U.S. 39 (Fifth Amendment applies where tax scheme compels detailed incriminating registration for inherently suspect class)
Leary v. United States, 395 U.S. 6 (Fifth Amendment protection where tax/registration statute creates real and appreciable risk of incrimination)
United States v. Hubbell, 530 U.S. 27 (compelled disclosures that are testimonial and incriminating can provide link in chain)
PLIVA, Inc. v. Mensing, 564 U.S. 604 (impossibility preemption standard: impossibility is demanding)
Keck v. Collins, 184 Wn.2d 358 (standard of review for summary judgment in Washington)