Running a business is not easy, but men and women in the state-legal medical marijuana industry have it worse than everyone else because of outdated federal laws. The way current laws are written, even though these people run a state-legal business they are not allowed to deduct all of their expenses the way other business owners get to do at tax time. And for some, that means they could end up owing more taxes than the entire year’s profit.
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This leaves dispensary owners, growers, medible makers and everyone else in the 23 states with a state-legal medical marijuana industry confused about exactly what they’re supposed to do at tax time. And, since the laws are the problem, even a good accountant can’t provide the answers they want to hear.
Most of these small business owners have never run a store or business before, and now they’re discovering that they can’t compete using the same rules as everyone else. These men and women are already paying state business fees and taxes that are horrendously bigger than those charged to every other business owner, including the cigarette, alcohol and adult industries.
And, to make matters worse, our Federal Tax Court has already denied deductions on everything from store rent to medical marijuana legally purchased for sale to patients in this state-sanctioned industry. The IRS does this by combining the Controlled Substances Act of 1970 classifying marijuana as a Schedule I drug together with IRS Code Section 280E disallowing the deduction of controlled substance expenses. This allows them to grab any profit made by these small business owners and drive them out of business. Because of this, everyone in the medical marijuana industry who turns in an honest tax return becomes a sitting duck for anti-marijuana auditors.
Before these legitimate businessmen and wo