An Obscure IRS Tax Law Could Derail Adult-Use Cannabis
Ryan Allway
December 2nd, 2014
Policy, Top News
A 1980s era tax law – known as 280E – threatens to derail the adult-use cannabis movement unless it’s repealed. In many ways, the law provides the federal government with a way to extend the drug war by making it cost prohibitive to sell marijuana for adult-use in states where it has been legalized. Congress is the only body that would be able to appeal the law that remains in effect.
The E280 law provides a way for the federal government to collect taxes on what it considers illegal drugs. More than five decades ago, the Supreme Court ruled that everyone has to pay taxes – even those that make money illegally. Congress later amended the tax code with 280E to say that businesses selling Schedule I Controlled Substances cannot deduct all of their regular business expenses.
In layman’s terms, the law means that dispensaries are not able to deduct costs associated with selling from their business taxes. These costs include things like rent, advertising, utilities, and salaries that are almost universally deductible by other businesses. As a result, some companies are putting upwards of 70% of their profits toward taxes paid to the federal government alone.
While states continue to push through pro-marijuana legalization measures, the federal government remains adamant in its position. These dynamics mean that dispensaries doing business in the industry will have to deal with steep tax bills coming up on April 15th or risk being shut down by the IRS, unless Congress moves toward passing more comprehensive legalization legislation.
This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.
About Ryan Allway
Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.
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