Law360 (July 31, 2024, 6:31 PM EDT) -- A Puget Sound-area dispensary is suing Greenleaf HR LLC, a payroll provider specializing in the cannabis industry, and another firm, claiming they failed to pay the IRS on its behalf resulting in a nearly $172,500 tax bill, according to a lawsuit removed to Washington federal court.
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Reach Island LLC, which does business as Issaquah Cannabis Co., claims that the companies it contracted to do its payroll twice failed to pay the IRS, causing a nearly $96,500 bill to balloon by almost $76,000, according to the suit originally filed in King County court.
The defendants, Greenleaf and Vensure Employer Services Inc., an Arizona-based payroll and service provided, filed a notice removing the complaint to federal court on Tuesday.
The suit seeks "no less than $172,479" in damages. Reach Island claims it hired the defendants for payroll services and penned an agreement that said that the payroll providers promised to "indemnify and hold harmless Reach Island" from any damages resulting from the actions they took, according to the suit.
Reach Island claims that it first learned its 2020 payroll taxes weren't paid in 2022, when the IRS notified the company that it failed to pay or report anything for that year, according to the suit. On top of what was already owed, the IRS tacked on an additional $37,000 in fines and fees, the suit said.
When Reach Island asked the defendants about "how this could have occurred," they said that they had made a mistake and would fix the problem, the suit said.
But the issue wasn't resolved, Reach Island said. The IRS sent a second notice in 2024, saying that the company now owned about $139,280. As a result, the IRS said it would be adding on $36,200 in penalties and interest, the suit said.
"Reach Island has effectively paid twice for its 2020 payroll taxes (once to Defendants and again directly to the IRS), in addition to the accumulated penalties and late charges caused solely by defendants' material breach and negligence," the suit said.
Reach Island is represented by Rochelle Y. Doyea of Cairncross & Hempelmann PS.
Greenleaf and Vensure are represented by Clifford S. Davidson and Kelsey M. Benedick of Snell & Wilmer LLP.
The case is Reach Island LLC v. Greenleaf HR LLC et al., case number 2:24-cv-01138, in the U.S. District Court for the Western District of Washington at Seattle.
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