IRS Section 280E

January 26, 2016

 

 

Under the 280E passed by Congress in 1982 businesses trafficking controlled substances  (schedule I & II) prohibited by Federal or State law shall not receive deduction or credit for expenses during the taxable year. Cannabis is considered a Schedule I controlled substance which means taxable cannabis business expenses for the fiscal year cannot be deducted and are subject to much higher Federal tax rates than the 35% corporate rate. Medical marijuana dispensaries have historically failed due to the heavy state and Federal tax rates enforced due to marijuana’s schedule I drug class. For tax purposes it's vital for cannabis companies to learn what's included in their taxable income because firms who don’t closely adhere to the Federal and state tax guidelines will be hit with a giant tax bill when the company is audited. 

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