California Cannabis Taxes and IRC Section 280E | Canna Law Blog™
In California, the first Cannabis Tax Return is due on April 30, 2018 and many of our clients are now working through the issues related to the Cannabis Cultivation and Excise Tax. In addition, many marijuana businesses must file their first 2018 estimated federal tax payment by April 17, 2018. To estimate taxable income, every Cannabis business must understand how to treat the Cannabis Cultivation Tax and the Cannabis Excise Tax on their federal income tax return. Are California Cannabis Taxes an expense of a cannabis business? If so, are cannabis taxes deductible for federal income tax purposes?
We have discussed the mechanics of IRC §280E here and here. IRC §280E disallows deductions for cannabis cultivators, manufactures, distributors and retailers. However, expenses included in cost of goods sold (“COGS”) reduce taxable income and operates outside the reach of IRC §280E. Generally speaking, IRC §280E is less damaging to cultivators than retailers, because cultivators can attribute more business expenses to COGS.
- Cannabis Taxes and Section 280E: Canna Care v. The IRS | Canna Law Blog™www.cannalawblog.com
- Policy Council: IRC Section 280E - An Unjust Burden on State-Legal Cannabis Businesses - The National Cannabis Industry Associationthecannabisindustry.org
- Understanding Internal Revenue Code Section 280E, Part 1 | Ganjapreneurwww.ganjapreneur.com
- How to Start a Cannabis Business in California | Cannabis Nowcannabisnow.com