The IRS says it wants to help

The IRS is here to help. Seriously. Up to a point.

Marijuana companies can’t take tax deductions or receive tax credits like other businesses. Blame Congress for that; it makes the tax regulations. In 1981, a convicted cocaine trafficker won his case in the tax court, allowing him to deduct his business expenses. Congress didn’t want other drug dealers to be able to deduct their expenses, so it put regulation 280E* in place. As long as marijuana is a Schedule I or II substance under the Controlled Substances Act, it will be subject to 280E and will pay higher income taxes than other businesses.

The IRS simply enforces the tax regulations, including 280E, and collects the money. While we all know and hate the IRS for taking our money and auditing our tax returns, it also tries to educate taxpayers so that they are complaint with the regulations.

De Lon Harris is the commissioner of examination at the IRS Small Business/Self Employed Division. He put up a blog post in September with tips for marijuana businesses on tax compliance. You can find it here: https://www.irs.gov/about-irs/providing-resources-to-help-cannabis-business-owners-successfully-navigate-unique-tax-responsibilities

This is our buddy De Lon:


The IRS also hosted a forum in August dedicated to tax policy for marijuana businesses and cryptocurrency. You can find other IRS resources here: https://www.irs.gov/site-index-search?search=marijuana&field_pup_historical_1=1&field_pup_historical=1

Of course, if you choose to ignore all the good advice, the IRS likely will not be so friendly. De Lon is a fair-weather friend to be sure.

*Internal Revenue Code § 280E says that no ordinary and necessary business expenses may be taken against income from trafficking in Schedule I or II controlled substances. Marijuana is listed under Schedule I. State legality makes no difference.

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