Tax attorney Rob Wood has written an article for Forbes magazine on the legalization of marijuana in some states and tax concerns, among other things. The article, “Corporate Cannabis? Legal Marijuana Goes Legit,” discusses the Canadian approach to the problem.
The problem is that the federal government doesn’t recognize marijuana as anything but a controlled substance included in the Comprehensive Drug Abuse Prevention and Control Act of 1970. But, as Wood points out, there are 20 states and the District of Columbia that have legalized marijuana for medical purposes, and Colorado and Washington have legalized recreational sales. Wood’s particular concern is that of a tax lawyer, noting that federal tax law denies producers of marijuana the use of the business deduction for their business expenses because of Section 280E of the tax code.
Wood explains that the deduction problem is the fault of Congress, not the IRS, although the IRS gets heavy criticism because of this. The disallowance of the deduction applies even to legal dispensation for medical sellers. Wood opines that the boom in sales in Colorado will cause legislatures, including Congress, to revisit the whole problem of how to deal with the sale of marijuana.
For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network. The Legal Broadcast Network is a featured network of the Sequence Media Group.