Impact of 280E on Cannabis Financials
With tax time just around the corner, many cannabis retailers are gearing up to once again report massive year-end net losses due to the impact that Section 280E of the federal tax code has on their financials.
You may be asking yourself how is that even possible, considering the US cannabis industry as a whole recorded a whopping $17.5 billion in sales in 2020. But the reality is that Section 280E of the federal tax code has had an incredibly draining impact on cannabis financials since the Schedule I controlled substance was legalized in many states.
If you’re unfamiliar with 280E, it states, “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.”
Essentially, what that means is that tax deductions and credits that other non-cannabis-related businesses are allowed to use do not apply to cannabis retailers – despite their legality – due to the fact that cannabis is still considered a Schedule I controlled substance under federal law.
Learn more about the history of 280E and its impact on cannabis operators by reading the full article at Beard Bros. Media.