Tax Time Hits Hard For Marijuana Businesses

COLORADO:  It’s tax time and small business owners all over America are digging out their receipts for deductions, except marijuana business owners because most deductions aren’t for them.

Some of the top tax deductions for small businesses include advertising, office supplies, utilities, business entertaining and legal fees. But cannabis businesses face an different issue that marijuana tax expert refer to as the 280 (e) problem. This U.S. tax code addresses expenditures in connection with the illegal sale of drugs. Marijuana is still classified as a Schedule 1 controlled substance and so the Internal Revenue Service must treat it as such, no matter what a state law may say. The code says no deduction or credit shall be allowed for any amount paid in carrying on a business in a controlled substance. The only deduction allowed is cost of goods sold and it’s used to reduce the gross profits.

These businesses found that it is critical to make sure the expenses are properly categorized as their tax returns are sure to be scrutinized. Accurate record keeping is critical not only for the marijuana businesses, but also the state governments that want to make sure they are collecting all the taxes owed to them. This isn’t a small amount of money. For example, Colorado collected $43 million in taxes for the fiscal year of 2014-2015 and local governments received over $547,000 from this kitty.


Despite Increasing Sales, Legal Pot Businesses Warn Of Impending Disaster If Changes Not Made

WASHINGTON:  The amount of legal pot sold in our state continues to increase each month since Washington’s first retail stores opened last summer.

The Washington State Liquor Control Board reports sales of nearly $18.5 million in January alone.

But the industry is sending up red flags, warning a number of problems from high prices to a glut of pot threatens to derail the burgeoning recreational market.

A steady stream of customers filed through Seattle’s Cannabis City in the SoDo neighborhood on a recent weekday afternoon to buy legal marijuana. Despite strong sales, general manager Amber McGowan says the shop and many others are struggling to make a profit under the weight of heavy taxes that have kept prices sky high compared to the street and the dozens of unregulated medical marijuana outlets operating around the state.

Fort Collins Schools Won’t Get Marijuana Money

COLORADO:  When Colorado residents legalized the retail sale of marijuana in 2013, some supported the measure because a portion of tax revenue was destined to boost school funding.

However, Poudre School District will not receive a dime of that money. Fort Collins-area parents who see critical needs in the district’s 50 schools, including a lack of air conditioning in some schools, are angry.

The constitutional amendment to legalize retail pot sales promised the first $40 million collected from a 15 percent excise tax on unprocessed retail marijuana would be used to help Colorado’s 178 public school districts.

The tax goes into the public school capital construction assistance fund and is transferred to the state’s Building Excellent Schools Today, or BEST, competitive grant program. Funding awarded through the program established in 2008 can be used for construction of new schools, renovation of existing public school facilities or addressing critical public health and safety issues.


Counties Shouldn’t Be Able To Double-Tax Marijuana

COLORADO:  Counties and cities have a right to tax their citizens to help the government pay for services — but taxpayers have a right not to be gouged.

Two separate bills in Colorado’s legislature would allow counties — with approval from voters — to assess a special sales tax on recreational marijuana even if municipalities in those counties already have a special tax in place.

This effectively would be a double tax, and that should not be allowed.

A simple way around the problem would be to amend the legislation so that a county couldn’t levy a special retail marijuana tax in areas that already assess such a tax.

IRS Advice On Marijuana: Deduct It…But Prepare For 50% Tax

DISTRICT OF COLUMBIA: Four states have legalized recreational marijuana, and 23 states plus the District of Columbia have legalized medical use. But federal law still classifies it as a controlled substance, regardless of how legal it is in the states. There’s a lot more than taxes at stake, since federal drug crimes and seizures are nothing to sneeze out. Yet taxes are huge issues too.

Paying state tax on marijuana admits you are violating federal criminal law, right? It sure seems that way, which is why there’s a lawsuit challenging the taxes as violating your right not to incriminate yourself. Yet state efforts to tax this new cash crop and its blooming legitimacy are growing. But what about the IRS? It is federal, and Marijuana remains illegal nationally. Even so, the tax law is clear that even criminal income has to be reported to the IRS. Remember Al Capone?

As a result, even legal medical marijuana businesses have big federal income tax problems: tax evasion if they don’t report, and a considerably smaller risk of criminal prosecution if they do. More imminent, though, is the risk of being bankrupted by their IRS tax bill. That’s because Section 280E of the tax code denies even legal dispensaries tax deductions because marijuana remains a federal controlled substance. The IRS says it has no choice but to enforce the tax code.

Could Federal “Sin Taxes” On Marijuana Reach As Much As 50%?

DISTRICT OF COLUMBIA:  Following a year of great reform for marijuana in states throughout the country, looming questions still remain about the future of federal marijuana reform.

In 2014, for the first time in the history of the drug war, the DEA no longer has funds to enforce federal statutes in states where marijuana is legal for at least the next two years. The D.C. City Council has also managed to announce its intent to implement recreational use because they feel they cannot “ignore” the will of the voters. In D.C., recreational use passed by 70% only to hit last minute horse trading in Congress over the Omnibus Budget Bill. Nevertheless, since no money is required to begin recreational sales, it appears that the D.C. City Council may proceed with its plans, potentially even per the good will of Congressional leadership.

The conversation on the topic all year in 2015 will be to move reform forward on the federal level beyond issues of law enforcement. The big topic on everyone’s agenda also appears to be taxes.

H.R. 501, introduced late last year, proposes legalizing marijuana at the federal level and taxing it with a whopping tax rate of 50%. This was not the only bill introduced in the last session, and some in fact did not propose any federal taxes but rather relegated this to the states.

Canadian Marijuana Growers Should Get Agricultural Tax Breaks

CANADA:  Tax breaks and exemptions are created to help businesses grow and succeed so that they can contribute to the economy. Many business owners will tell you that without some of their larger tax breaks, they wouldn’t be in business. The agricultural industry is no exception.

Agricultural companies in Canada rely on a lucrative tax break to stay in business. Unfortunately, legal cannabis growers in Canada will not be able to eligible for that tax break.

The reasoning behind the extra taxes is that cannabis is grown in an industrial area, which is virtually a requirement in Canada given the outdoor climate combined with the code and security requirements involved. It’s a ridiculous way to discreetly discriminate against North America’s next big industry. I would be curious to know how many indoor grow facilities there are in Canada for non-cannabis agriculture items, and how they are taxed comparatively.



Skyrocketing Tax Revenues from Pot in Colorado–Will Texas Take Note?

TEXAS: Will the booming taxes being collected in Colorado from marijuana be enough to turn the heads of Texas lawmakers in favor of legalization, or at least lessening the penalties on pot and allowing for taxation?


Retail marijuana sales in Colorado brought in $1.4 million in January, and that number jumped to nearly $1.9 million in March, as the popularity of legal marijuana makes using the drug more legitimate for more people.


Colorado analysts say the message is simple–the January taxes weren’t just from faddists who ran out to buy pot as a ‘new toy.’  Legal marijuana use is taking effect across the Centennial State, and Cheyanne Weldon of the Texas Chapter of the National Organization for the Reform of Marijuana Laws says Texas politicians can’t help but take notice.


“The way we can control it is through a regulated market,” Weldon said of failed efforts to reduce the use of marijuana by law enforcement.  “We can capitalize not only on marijuana taxes themselves, but on the new industries, and the jobs.”