Cannabis Businesses Need to Think Strategically to Handle Higher Taxes
So…You Want to Start a Cannabis Company
Imagine: The state you live in now legally recognizes the recreational use of marijuana, and you’re eager to start a business that capitalizes on the law change. As an intelligent entrepreneur, you recognize that sound legal, business, financial, and tax advice are integral to your company’s success, so you seek out input from trusted advisors. Your jaw hits the floor when your attorney tells you that, depending on how your business operates, you may end up paying a substantial amount more in federal income taxes than you otherwise would if your business were not a cannabis-related concern. You wonder, “Why does it make a difference?”
Cannabis Laws Differ at the State and Federal Levels
Though it may be legal in your state, cannabis is still considered illegal by the federal government. As a result, cannabis companies aren’t eligible to claim the federal tax credits or deductions available to other types of businesses. This is outlined in Section 280E of the Internal Revenue Code, which states that:
… Keep readingNo deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such