Over the two decades we have gone from not a single state with any form of a marijuana program to currently almost half the united states having some form of a legal marijuana program for medical issues and the numbers are only increasing.
However earlier this month we have discovered that there potentially could be an obstacle stronger than the progression of the cannabis movement that could stop its growth and that is the Federal courts.
On July 9, 2015, in reference of the case Olive v. Commissioner, san Francisco’s Ninth Circuit of Appeals upheld U.S. tax code section 280E which say’s that expenditures in correlation with the sale of illegal drugs do not count for any deductions or credits. What this means is the cannabis industry is not able t deduct necessary and regular business expenses and are there for being taxed on 100% of their gross profit versus their net profit.
The idea here isn’t hard to understand even if individual states pass laws legalizing cannabis and make and effort to set up shop with a friendly business environment, federal tax laws will remain dominant to state tax laws. Unless the IRS makes an alteration to section 280E, there is no way get over paying taxes on gross profits for cannabis-based businesses and this has the potential to be harmful news to the marijuana industry.
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