WASHINGTON: Navigating the business byways of Washington State’s emerging legal marijuana industry is challenging; we are literally building the road as we walk it. The emergent nature of the business leaves us all feeling a bit uncertain as to the expectations, legalities and structures necessary for compliance. Under the, Internal Revenue Code section 280E, businesses cannot deduct expenses for trafficking illegal drugs.
The tax consequence is that expenses that would normally be deductible in the course of business are not – there is more taxable income which means you pay more taxes. Record keeping under 280E is challenging at best and is going to take some time to sort out. So far it is clear that you’ll be able to write off the cost of goods sold or COGS but how to structure costs and expenses will take some specialization. I’m writing today to offer some sound advice when thinking about setting up your accounting system. It will save you money over the long run. [Read more…]