Taxes are a huge problem for those who are working in the marijuana industry. That’s because high tax bills frequently hit cannabis businesses. Often, marijuana excise taxes are being assessed along with the regular business taxes. Although some business owners of marijuana are fighting back, they usually lose.
One of the marijuana tax law problems is the IR Code Section 280E. It is a part of a tax rule that prevents businesses in the industry from writing off those standard business deductions. As a result, it created a high tax rate.
Cannabis is a controlled substance. Although the marijuana tax law denies any deductions, it allows cannabis business to continue to deduct a portion of their expenses which are covered by the Cost of Goods Sold (COGS). To maximize their deductions, marijuana business owners allocate their expenditures to COGS.