Voters in four states and Washington, DC, have approved marijuana legalization. But the drug remains illegal under federal law, creating all sorts of legal hurdles that state-legal marijuana businesses have to overcome.
One of those hurdles is federal taxes. Due to a section of the tax code known as 280E, many state-legal marijuana businesses have to pay taxes on basic expenses like rent, employee salaries, and utility bills — unlike other legal businesses, which are allowed to deduct these types of expenses.
For some businesses, this can drive their effective tax rates to 70 to 90 percent of their profits, which is enough to force many shops out of business. In comparison, other types of businesses can expect effective tax rates closer to around 30 percent.
The New York Times's Jack Healy reported on one medical marijuana business in Seattle that paid nearly 87 percent of its profits to federal taxes:
In Seattle, John Davis earned $53,369 in profits last year from his medical marijuanadispensary, the Northwest Patient Resource Center. Because he complied with all of the tax rules prohibiting deductions, he said, he ended up owing $46,340 in taxes.
"It's basically a dagger at the throat of the entire legal cannabis industry," Steve DeAngelo, co-founder of California-based medical marijuana dispensary Harborside Health Center, told me.
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6 comments:
Idiots should've made a gas station as a primary and just sold errd like goods in the store.
this needs to expand on a federal level. We would crush the cartels and get rid of all the mexican dirt weed in one swoop. In the end the ones using would be happy because the product would be much better.
Class action suit.
If you can't make enough profit under the rules that exist then get out of the business or quit complaining.
"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 trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and 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."
This was enacted to try to snare illegal drug sellers by getting the IRS involved, which works really well with big drug cases. Now it's punishing those with legal seller status. Maybe it's time to change the wording to undo this obviously ill-enforced law.
Since the REALLY big players in the drug industry are Senators, state representatives and those who can bribe them, the laws won't change quickly.
When you start hitting the profit lines of THESE guys, don't look for their help real soon.
Unless you can top the bribes of the current batch of criminal smugglers and buyers.
That's just politics.
Keep cheering.
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