IRS Position On 502 Excise Taxes – “Don’t Count Excise Tax Amount As Income”

"If you any person in a trade or business receives a payment of $10,000 or more in any single transaction or series of transactions they are required to file a form 8300 within 15 days of receiving the cash.  Please note that a “person” includes an individual, a company, a corporation, a partnership, an association, a trust, or an estate.  You should also be aware that “cash”  includes cashier’s checks, money orders, bank drafts and traveler’s checks.

WASHINGTON: Dean Guske, CPA to many marijuana businesses in Washington State (and around the country),  and his firm, Guske & Company, have been taking the position with their clients since the beginning of the year that the 502 excise taxes DO NOT have to be counted as income when 502 Cannabis businesses file their federal income taxes.  Instead, the excise tax is a reduction from the net income.

This is in direct contradiction to what most people in the industry have thought was the position of the IRS – that the full amount taken in from sales would be counted as income before the excise taxes were paid to the Washington State Department of Revenue, and therefore would double tax the businesses by having to pay tax on income they didn’t get to keep.

But a new memo issued by the IRS today confirms Guske’s position, concluding that: “A taxpayer who paid the State of Washington marijuana excise tax should treat the expenditure as a reduction in the amount realized on the sale of the property.”

You can read the full memo here.

Read full article @ Gleam Law blog

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