A TAX HEADACHE IS ONLY ONE MISTAKE AWAY
Section 280E is only a few lines, but carries significant impact for the cannabis industry. The law reads as such:
“No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such tra activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I or II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.”
More simply, the law denies cannabis businesses any U.S. federal income tax deduction for ordinary and necessary business expenses, despite being duly licensed as a legal business in their state of operation. U.S. Congress enacted the law in the 1980s following a court case which disallowed a convicted cocaine trafficker from claiming deductions from ordinary business expenses under federal tax law. While the law intends to target illegal drug dealers, it simultaneously generates considerable problems for cannabis companies legally operating in their respective states because marijuana is a Schedule I substance.
Cannabis tax laws are complex and complicated. We take pride in being a business leader working with those in the cannabis industry to handle all accounting, tax and business consulting needs. Our cannabis industry experts have unrivaled experience and dedication to working with cannabis clients and understand the uniqueness of the industry and the depths of the concerns without federal protections.
THERE’S NO BETTER TIME THAN NOW TO DISCUSS TAX PLANNING STRATEGIES THAT WILL HELP YOU BUILD A FOUNDATION FOR FUTURE SUCCESS.
To find out how our team of experienced tax and accounting professionals can help your small business achieve success call us today or use the contact form below.