280E Is A Cannabis Tax Code Meant to Kill The Cannabis Industry

If you are anything like me—and Jah help you if you are—there are few things you enjoy more than blazing up a fat sticky joint, kicking off your shoes, and poring over tax code. (Have you ever really thought about estate and gift tax rates? Ever thought about them… high?)

So bear with me as we delve into what may be my wonkiest column yet.

Here’s the scenario: You open a medical or recreational cannabis dispensary in one of the 23 states that have laws allowing such a thing.

You are slinging fat sacks in full compliance with the law, which is no easy task. Maybe you join the Chamber of Commerce, sponsor a Little League team, and generally work to become a pillar of the community.

That includes being a good American and paying your taxes, because when you were doing this on the illicit market, putting “Weed Consultant” on your tax form wasn’t exactly an option.

You save your receipts and count up your deductions—until you stumble across a little-known tax code amendment known as 280E.

280E was enacted long ago in 1982, in response to a Minneapolis coke and meth dealer who attempted to deduct the costs of his rental apartment, phone bill, and scales.

(Which sounds like the sort of carefully measured and considered type of action undertaken by someone on meth.)

This law forbids anyone engaged in selling cannabis from taking the tax credits and deductions that are afforded any other business.

It doesn’t apply to the actual production of cannabis: Soil, nutrients, etc., are deductible, as these are considered “the costs of the product.” But when that same cannabis is ready for sale, the seller is royally screwed.

The “costs of selling” the finished product, which include rent, advertising, utilities, and employee salaries, are NOT deductible.

How much of a difference can a few deductions make?

A standard business tax rate is typically 30 to 40 percent. Without the deductions and tax credits, some marijuana dispensary owners are paying 80, 90, or 100 percent of their profits.

Thankfully, Congress is on the case. (Cue derisive laughter.)

Since the IRS can only change tax code through an act of Congress, our own bow-tied Representative Earl Blumenauer co-sponsored a bill with a Colorado colleague this past July.

Known as the “Small Business Tax Equity Act”, it would exempt marijuana businesses licensed by states from Section 280E.

This needs to happen.

Otherwise, any refusal to change 280E is a punitive action on the part of a Congress that wishes to continue its failed war on drugs.

“If we can’t arrest purveyors of pot, we can just tax them out of existence.”

Name me another legit business that faces as much scrutiny, oversight, regulation, and is forced to hand over nearly all of their profits. While you do, I’ll spark up that aforementioned joint.

Josh Taylor is a well-known and successful entrepreneur in the legal cannabis space, producing B2B and B2C cannabis events, "Backstage Budtending" and upscale concierge services through his companies OregonCannabisConcierge.com and CaliforniaCannabisConcierge.com. His weekly syndicated newspaper column and features about cannabis ran for five years until March 2020.

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