Federal Tax Laws Are Screwing Legal Marijuana Businesses

Federal Tax Laws Are Screwing Legal Marijuana Businesses

Almost a month has passed since April 15, but taxes are back in marijuana news headlines thanks to a New York Times exposé on the industry’s extremely flawed tax laws.

An out-of-date provision has caused many legal, operational marijuana businesses to owe egregious amounts of taxes to the IRS. In 1982, a cocaine and meth dealer in Minneapolis tried to argue in tax court that money he spent on travel, phone calls, and packaging his wares should be considered tax write-offs. Unsurprisingly, he did not win, and the IRS officially banned all tax credits and deductions from “the illegal trafficking of drugs.” He did, however, screw over many upstanding businesses trying to navigate a budding industry constructed on hypocritical contradictions between state and federal laws.

The Times spoke to Bruce Nassau, the owner of five marijuana stores in Colorado, who says the I.R.S. demanded a check for $275,000 after going over his 2014 tax return. Another dispensary owner was forced to pay $866,000 in taxes after taking in $1.7 million in 2014 — more than half the year’s income, before expenses. The reason for this outstanding demand goes back to provision 280E, added to the tax code decades ago thanks to the hubris of a meth dealer.

To read more in depth about this issue, check out the article here. As the marijuana industry continues to navigate uncharted territory on its way to full legalization, we can only hope the federal government will catch up sooner than later, before honest small business owners in this legal industry are forced out of business by their country’s dated federal laws — tax and otherwise.