309-740-4033 tom@collateralbase.com
Select Page

IRC 280E & Marijuana

Internal Revenue Code 280e

The Controlled Substances Act (CSA) expressly prohibits possession and commerce in marijuana. 21 U.S.C. §§ 841(a)(1), 846.  All marijuana is prohibited, no exceptions.

However, a different law that authorizes federal funds to the Department of Justice contains an exception to the prohibition of marijuana pursuant to the CSA – at least in Section 538 of the Budget that has defunded the war on medical marijuana.

Despite this, state law compliant cannabis dispensary businesses still have problems with double taxation due to Section 280E of the Internal Revenue Code (IRC)

IRC 280e Text:

No 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 trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.

(Added Pub. L. 97–248, title III, § 351(a), Sept. 3, 1982, 96 Stat. 640.)

If you need a cannabis attorney, please hit me up on social media if I can help you out.  Or Call: (309) 740-4033

IRC 280E

IRC 280E

“IRC 280E has the cannabis industry paying more taxes than any other legitimate business in the United States.”

IRC 280E creates havoc for medical marijuana businesses

Photograph by Lorem Ipsum via Unsplash

Ganjapreneur Podcast Host Tim Branfalt

  How is Cannabis Portrayed in the Media? You’ve probably seen it, headlines around mid-to-late October warning parents that people are sneaking cannabis into their kids Halloween candy. You and I both know that in this economy - no one is giving away free weed....

How to Win a Cannabis License

  How Do I Win a Cannabis License? It’s application season in Illinois and competition is fierce! With only 75 licenses to award, every point in an application counts. Applying for a license is costly, competitive, and in most cases a one time opportunity. This week...

Security Plans for Cannabis Businesses with Thomas Carnevale

  What is Cannabis Security? Cannabis Security means that not one gram of cannabis goes missing from seed to sale and everyone in the supply chain from grower to transporter to dispensary to buyer is protected and safe during their purchase and business operations....

Women Made Cannabis Legal in Illinois with Rep. Jehan Gordon-Booth

Why Illinois' New Cannabis Law is Considered The Most Progressive Bill Yet Illinois is slated to legalize recreational cannabis on January 1, 2020. The bill that was proposed is considered one of the most progressive cannabis bills yet. This week Miggy and Tom sat...

Keith Stroup – Founder of NORML

    What Does the 2020 Election Hold for Cannabis Legalization? Cannabis legalization has come a long way in the last few decades. Thanks to educational efforts, passionate advocates, and non-profits like NORML and the Marijuana Policy Project, the movement...

Cannabis Recycling & Waste Disposal

How is cannabis waste managed & recycled?Cannabis is just the flowers of the plant, which is pretty woody and grown for its tough fibers with industrial hemp cultivars. What do growers, dispensaries, and cultivators do with unusable cannabis waste after harvest?...

The Talking Hedge with Josh Kincaid

The Talking Hedge with Josh KincaidThe Talking Hedge with Josh Kincaid is a cannabis business podcast hosted by Josh Kincaid - a security risk analyst with broker experience that has been pushing for cannabis consumption lounges in Washington state for years.  He...

Cannabis Vending Machines – Grasshopper Kiosks

Are Cannabis Vending Machines the Future?! Cannabis Vending machines are incredibly convenient. Cannabis startups around the world are leading technological advances and Grasshopper Kiosks is no exception. This week we spoke with Ron Christensen the CEO at Grasshopper...

Trump Allowing States to Legalize Cannabis

Trump again says he is allowing states to legalize cannabis President Trump answered a question about legalization: “We’re going to see what’s going on. It’s a very big subject and right now we are allowing states to make that decision,” Trump said. “A lot of states...

Nana’s Secret Hemp-Derived CBD Banned

What the Hemp Ban Means for CBD BusinessesWashington state, one of the first states to legalize recreational cannabis, has announced a ban on hemp-derived CBD food and beverage products. Tom was joined by special guest host, Josh Kincaid from The Talking Hedge, to...

Here’s the takeaway from IRCE 280e

In 1980 a coke dealer got busted, but his attorney said that he should be able to deduct the cost of his illegal cocaine sales business.  As a result, Congress passed IRC280E and forbid deducting costs of “carrying on” a business of selling schedule 1 substances, which are prohibited by state or federal law.

Businesses typically deduct two main costs – those of goods sold, and those of ‘carrying on’ the business.  

The costs for carrying on a business are those related to operations in sales.  For example, your rent, phone bill, utilities, employees, marketing, little baggies for the above-described coke dealer, everything except the costs of the goods sold (COGS).

Fun Fact: Congress did not include COGS in the law banning the ‘carrying on’ deductions for fear of a constitutional challenge.

The marijuana industry makes this distinction quite easy. Costs of goods sold are those incurred in growing and preparing the crop for market, while those of carrying on the business are those related to its sale.  As a result, cultivation centers have to worry about the double tax less than dispensaries.  

IRC 280e will apply until Marijuana out of CSA

The costs a cultivation center incurs go to the cost of producing the cannabis, while the costs incurred by the dispensary are all related to its sale.

In the video, Tom explains how the precise wording of three pieces of federal law – and a bedrock principle of tax law – all come together to avoid the double taxation issue to state-law approved medical marijuana businesses.

Check out the video – and subscribe to the Cannabis Industry Lawyer’s YouTube channel to ask your question about a legal issue in the legal marijuana industry.

Cannabis Attorneys

Call our office with your commercial legal questions for help on:

→ Hemp Applications

→ Compliance tips

→ Contract drafting

→ Negotiating insights

→ Buy/Sell business options

REACH US BY EMAIL

9 + 1 =

0/5 (0 Reviews)
Share This