Lawmakers might give cannabis businesses crucial tax relief

Thor Benson / Cannabis News Box Contributor

As the tax code stands, a section called 280E makes it impossible for cannabis businesses to write off necessary expenses, like rent and wages. This is a major problem for cannabis business owners and can result in them spending tens of thousands of dollars more on taxes every year than a business with similar revenues might. However, some lawmakers are proposing to fix this by exempting cannabis businesses from these taxes.

Republican Rep. Carlos Curbelo of Florida and Democratic Sen. Ron Wyden of Oregon are working together to attempt to get this exemption by each introducing the same bill that would allow it in the House and the Senate. If they can get enough support from other members of Congress, which is still far from guaranteed, then they could give cannabis business owners this much-needed tax relief.

“Right now, cannabis businesses cannot deduct taxes like other businesses, so the cost of doing business is much higher and in many cases prohibitive to running a successful business,” Morgan Fox, communications director for the Marijuana Policy Project, told Cannabis News Box. “Considering all the other costs associated with doing business in the cannabis space (testing, security, etc) that are not present in other industries, not allowing deductions really hurts small and large businesses.”

In terms of what cannabis business owners want to change in America’s laws, Fox said this is up there with banking access and generally ending the federal prohibition of cannabis. The reason these businesses are uniquely hurt by this section of the tax code is because it was created in the early 1980s to prevent drug dealers from writing off their expenses, which was apparently happening in rare cases, and selling cannabis is treated as the same since it’s illegal at the federal level.

Fox said exempting cannabis from 280E could mean cannabis businesses would hire more people and generally make improvements to their businesses. That means it would actually be good for the economy. One of the main problems with getting this legislation passed is that many lawmakers don’t understand the issue very well, but cannabis advocates are hopeful that Congress will take this seriously and fix the tax code.

It’s already expensive to open a dispensary or a cannabis grow, but it becomes prohibitively expensive when you also have to deal with a flawed tax code that takes large sums of money from you every year. It would be a small but important change of drug policy that many think needs to happen right away.