Growing Pains with Medical Marijuana Taxation – Cannabis Industry News Alert

Growing Pains with Medical Marijuana Taxation – Cannabis Industry News Alert

WRITTEN BY: Bradley Arant Boult Cummings LLP Contact  Bethany Breeze Davenport Whitt Steineker More and more states across the South are adopting medical marijuana regimes. With this growth comes growing pains. One such pain for marijuana businesses is the tension between following state laws on a product that is still illegal at the federal level. This has impactful results for the taxation of medical marijuana businesses. A business in the trade or business of trafficking a controlled substance – and marijuana is a Schedule I substance under the federal Controlled Substances Act – is disallowed all deductions usually allowed for that business under 26 U.S.C. § 280E. Normally, businesses can take a deduction for the costs incurred in carrying out a trade or business under § 26 U.S.C. 162(a). These businesses may also not deduct for state and local taxes paid or for charitable contributions. These businesses are allowed to offset gross income by the cost of goods sold (COGS). Because COGS is a part of computing gross income per Tres. Reg. § 1.61-3(a), COGS is not a deduction and a business selling marijuana can still offset income through COGS. The COGS equation can be boiled down as the following:…

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Source : CANNANNEW REPORT
Link to original : Growing Pains with Medical Marijuana Taxation – Cannabis Industry News Alert
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