Marijuana-related businesses face myriad financial concerns due to discrepancies between state and federal laws. They are cash-based businesses because most banks won’t accept their money. They aren’t allowed to deduct common overhead expenses on taxes, and even attorneys and accountants are reluctant to give advice to these businesses for fear of reprisal themselves. The IRS is taking steps to change some of this. Just last week, an IRS committee recommended that lawyers and accountants not be punished or targeted for helping cannabis-based businesses. Other legislation in progress may allow tax deductions of expenses. Read on to learn more.

  • IRS Advisory Council Recommends Protecting Tax Preparers Who Advise Marijuana Businesses. Accounting Today: “‘To complicate matters further, the new marijuana businesses, legal under state law, are cash businesses because banks will not do business with them for fear of violating federal trafficking and federal money laundering regulations,’ the report said. ‘Federal money laundering convictions can mean decades in prison. With over 20 states allowing medical marijuana and now states beginning to legalize recreational marijuana, this industry needs qualified, ethical professionals to help them fulfill their income tax obligations. But IRSAC members have heard concerns from tax professionals in Colorado as to whether their federal licenses are at risk or their ethics are in question if they serve the marijuana industry.’”
  • Legal marijuana shops targeted by IRS, often forced to give 70 percent or more of their profits to the federal government. Natural News: “As marijuana vendors in Washington and Colorado (where recreational pot is already legal) are finding out, the outdated tax codes make it extremely difficult to make a profit. The tax code known as 280E, which was introduced in the 1980s at the height of the War on Drugs, says that businesses which sell Schedule I or Schedule II drugs -- which include marijuana as well as heroin, cocaine and other substances -- cannot deduct most of their business expenses. This means that many of the pot shops are forced to give 70 percent or more of their profits to the federal government.”
  • Congressional Report On The Federal Government Taxing Marijuana. The Weed Blog:“The Congressional Research Service (CRS) released a comprehensive thirty five-page report last week examining the federal government establishing a wholesale excise tax on the production and sale of cannabis-related products...CRS’ economic analysisindicates that cannabis prices are likely to fall from today’s prohibition-influenced prices of $200-$300 an ounce to as low $5-$18 ounce. Economic modeling based on a $40 billion annual cannabis market in the United States tests a $50 per ounce federal excise tax price point (generating nearly $7 billion in federal excise taxes).”
  • Bill Would Allow Marijuana Businesses to Join Mainstream Tax Laws. Rocky Mountain PBS I-News: “Rep. Earl Blumenauer, D-Ore., is the sponsor of the Small Business Tax Equity Act, which would exempt state-licensed marijuana businesses from the 280E code. Congress approved 280E in 1982 as a tactic in the government’s war on drugs. Although Blumenauer thinks the bill could be approved within two months, so far it hasn't mustered a committee vote.