Anonymous asked HBK CPAs & Consultants , 2/25/2019 ( 1 comment )

Why is taxation related to cannabis businesses so complicated?

HBK CPAs & Consultants replied:

Due to Section 280E of the Internal Revenue Code (IRC), a business may only deduct “cost of sales” from gross receipts in determining taxable income.  Ordinary and necessary business expenses are not deductible for cannabis businesses – such as salaries, rent, utilities.  This creates an extraordinarily high tax burden.  The complexities of the IRC and developing tax case law create a highly complex compliance burden for taxpayers in the cannabis industry.