An online resources page dedicated to the legal cannabis industry has been published by the Internal Revenue Service (IRS). The primary goal of this cannabis tax payment guidance – which was prompted after the U.S. Department of the Treasury broadcast an April report scolding the IRS for failing to provide the necessary guidance and resources to industry players – is to enlighten cannabis business owners on the role they must play in paying federal taxes. 

“A key component in promoting the highest degree of voluntary compliance on the part of taxpayers is helping them understand and meet their tax responsibilities while also enforcing the law with integrity and fairness to all,” reads an excerpt from the IRS’ cannabis tax payment guidance notice. “This article provides general guidance including frequently asked questions for taxpayers in the cannabis industry.”

Details of the report were posted on the official IRS Twitter account, as well as on the IRS website.

Federal taxation of the legal cannabis industry is a grey area

Since cannabis remains to be a Schedule I drug listed on the Controlled Substances Act (CSA), it is deemed to be a federally illegal substance; bound by the same restrictions as heroin and LSD. Because of this, the subject of cannabis tax payment guidance is a grey area.

Fortunately, due to the IRS issuing cannabis industry owners with information regarding tax payments, the process of understanding and paying federal taxes has been clarified. The news is sure to be well-received by industry players, what with cannabis businesses long being denied the tax deductions and benefits that legal industries are granted access to.

“The IRS understands this is a new and growing industry and provided frequently asked questions about record keeping, cash payment options, large cash amounts, and other related topics to help promote voluntary compliance in the industry. In addition to this page, the IRS also offers a wealth of general small business guidance and resources on IRS.gov,” wrote the agency in its recent statement.

The cannabis tax payment guidance should provide “cannapreneurs” with the information they need to pay taxes using large cash payments. Since financial services, such as banking institutions and payment processors, are off limits to companies involved in the federally prohibited weed space, those involved in the industry have been craving clarity for quite some time.

Has cannabis tax payment guidance been triggered by looming vote on MORE Act?

An eagerly anticipated vote on the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act, HR 3884 is set to take place within the next week. If the vote is successful, cannabis would be removed from its Schedule I status, and decriminalizing nationwide. 

While the IRS has not indicated that the forthcoming vote – which must be approved by the House and Senate –  steered its decision to release cannabis tax payment guidance, it’s likely that reform efforts have played a role. It is also probable that the guidance is a reaction to the Treasury Inspector General for Tax Administration’s report that was published earlier this year.

Included in the online documents is a FAQ page, cash tax payment guidelines, a thorough overview of Section 280E, and resources for regulations and forms that must be acknowledged by actively-operating cannabis businesses.