Cannabis Businesses Face Tax Dilemma: A Closer Look At IRS Roadblock
The cannabis industry is currently navigating a significant financial obstacle due to the IRS’s Section 280E, a tax provision that places a heavy burden on legal cannabis operations.
Matt Hawkins, founder and managing partner of Entourage Effect Capital and upcoming speaker at Benzinga’s Cannabis Capital Conference, shed light on the implications of this tax code, emphasizing its impact on the growth and financial health of cannabis businesses.
Understanding Section 280E
Section 280E of the Internal Revenue Code prohibits businesses involved in the trafficking of Schedule I and II controlled substances, as defined by the Controlled Substances Act (CSA), from deducting ordinary business expenses.
Since cannabis remains a Schedule I drug federally, this provision applies to all cannabis businesses, significantly increasing their tax liability by disallowing deductions for everyday business expenses.
The Ripple Effect On Cannabis Operators
“The landscape for all legal …