Robert W. Wood
Pound Hall at Harvard Law School (Photo credit: Wikipedia)
I’m the last one to say this is a silly topic, because it is not. But you have to admit is sounds a little funny. Bizarrely–and there’s much in our tax law that’s downright bizarre–there’s actually a need for this kind of, er, down and dirty tax planning session. And someone should bring the Cheetos.
Perhaps Harvard’s Board of Trustees will get wind of it and get upset. But the ire should be directed at tax rules that need fixing. Now that we have legalized medical marijuana in 18 states and the District of Columbia can these businesses be run like businesses? Not really. Massachusetts was the most recent entrant, and its marijuana businesses, like those in all the other states, face legal and tax problems.
For that matter, Colorado and Washington have even legalized recreational use. Again, tax problems there too. Why? Because even legal dispensaries are drug traffickers to the feds. Section 280E of the tax code denies them tax deductions, even for legitimate business costs. Of all the federal enforcement efforts, taxes hurt most. “The federal tax situation is the biggest threat to businesses and could push the entire industry underground,” the leading trade publication for the marijuana industry reports.
One answer is for dispensaries to deduct otherexpenses distinct from dispensing marijuana. If a dispensary sells marijuana and is in the separatebusiness of care-giving, the care-giving expenses are deductible. If only 10% of the premises are used to dispense marijuana, most of the rent is deductible. Good record-keeping is essential. See Medical Marijuana Dispensaries Persist Despite Tax Obstacles.
Robert W. Wood