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The IRS & Legalized Marijuana, Not so Fast | Taxation Brief

The IRS & Legalized Marijuana, Not so Fast

Forbes on legalized marijuana after the 2012 election:

But no matter how “legal” the states make it the IRS is federal and that means trouble. American businesses pay tax on their net not their grossincome and business expenses are as American as apple pie. But Section 280E of the tax code denies deductions for any business trafficking in controlled substances. This black letter rule to stop drug dealer tax deductions also covers medical marijuana since federal law still classifies it as a controlled substance.

In other words, marijuana dispensaries in states where marijuana is legal for either medical or recreational use, cannot deduct any expenses.