This comparison shows how a marijuana bakery can’t claim federal deductions a typical bakery can claim. Items in green cannot be deducted. (Image courtesy of wweek.com)
The long lines and eager customers at Portland’s pot dispensaries this week disguise a bitter financial reality: Much of the cash from Oregon’s legal weed sales is being inhaled by the Internal Revenue Service.
That has long been the case for medical marijuana. The legalization of recreational weed has generated a land rush of investors looking to cash in, but many newcomers are getting a rude surprise.
The federal tax code prohibits pot growers, processors or dispensaries from claiming standard business deductions in their tax returns.
That means cannabis businesses can deduct only the cost of goods sold—and can’t deduct significant expenses such as making payroll, paying rent, and buying advertising, all of which are expenses most businesses write off.
Jeremy Plumb (pictured with Representative Earl Blumenauer)
This is the Death Star. Until cannabis is rescheduled, there’s always going to be issues with the tax code. The longer you’re in operation, the more punitive 280E becomes. Over time, you’re just going to have to put in so much additional money, it just becomes untenable.
Read Aaron Mesh’s “Marijuana Businesses Are Raking In Money—And The IRS Will Take Most Of It”: http://www.wweek.com/2015/10/07/marijuana-businesses-are-raking-in-money-and-the-irs-will-take-most-of-it/
