The federal government is taxing marijuana businesses to death
Voters in four states and Washington, DC, have approved marijuana legalization. But the drug remains illegal under federal law, creating all sorts of legal hurdles that state-legal marijuana businesses have to overcome.
One of those hurdles is federal taxes. Due to a section of the tax code known as 280E, many state-legal marijuana businesses have to pay taxes on basic expenses like rent, employee salaries, and utility bills — unlike other legal businesses, which are allowed to deduct these types of expenses.
if Big Marijuana becomes Big Tobacco?Big Marijuana is scary. But not as scary as continuing prohibition.
For some businesses, this can drive their effective tax rates to 70 to 90 percent of their profits, which is enough to force many shops out of business. In comparison, other types of businesses can expect effective tax rates closer to around 30 percent.
The New York Times's Jack Healy reported on one medical marijuana business in Seattle that paid nearly 87 percent of its profits to federal taxes:
In Seattle, John Davis earned $53,369 in profits last year from his medical marijuana dispensary, the Northwest Patient Resource Center. Because he complied with all of the tax rules prohibiting deductions, he said, he ended up owing $46,340 in taxes.
http://www.vox.com/2014/11/17/7210705/marijuana-legalization-280E
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