IRS issues important guidance for cannabis businesses
Marijuana businesses should be aware of a new guidance from the Internal Revenue Service, which directly affects the cannabis industry. The IRS issued the document in response to an April watchdog report that criticized the agency for lack of information regarding the cannabis industry’s obligation to comply with federal tax laws.
Although cannabis is still illegal at the federal level, cannabis businesses do have to pay their taxes.
The new guidance notes that cannabis companies can use payment plans. And while Section 280E bars cannabis businesses from taking advantage of deductions and credits, the guidance states that it does not “prohibit a participant in the marijuana industry from reducing its gross receipts by its properly calculated cost of goods sold to determine its gross income.” Therefore, a marijuana business could “reduce its gross receipts by its cost of goods sold, as calculated pursuant to Internal Revenue Code section 471.”