Tough on crime. The war on drugs. The sentiment of the country was all about rooting out the evils of the industry, and keeping shady individuals from making a profit of the innocent. To that end, in 1982 Congress amended the tax code. Section 280E was written so that businesses “trafficking in controlled substances” could utilize common deductions that legitimate businesses do, such as rent and other expenses. This leaves legal marijuana businesses today paying up to 70% in taxes.
Even though marijuana sale and use is still illegal federally, the IRS still expects them to pay taxes because they must incorporate in their state of residence in order to pay those taxes as well.
Many entrepreneurs dream of opening a large marijuana store and then are dragged to reality once they read the tax code and see how much money they will actually be making.
“Everything from how the stores laid out to merchandising to inventory management, [the tax code] dictates how the business operates. “Instead it’s more like a 7-Eleven, because it’s all about efficiency,” says Ian Eisenberg, owner of Uncle Ike’s, a cannabis store in Seattle, Washington.
Business owners are not without support, however. Last year Senators Ron Wyden and Rand Paul, an Oregonian Democrat and Kentucky Republican respectively, introduced legislation called The Small Business Tax Equity Act which aimed to allow marijuana business owners to claim standard business deductions.
The measure has been stuck in committee ever since.
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