The Castro's newest cannabis retail store, Flore Store (258 Noe), is now open while historic neighborhood restaurant Flore (formerly Cafe Flore) has remained shuttered for two years.
Legal Cannabis Companies Pay Insane Tax Rates Thanks To A Minnesota Speed Dealer
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Tax Burden: state legal cannabis companies pay under a tax code created to discourage illegal drug trafficking.
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In 1975, Jeffrey Edmondson, a drug dealer based in Minneapolis, filed his taxes. As a self-employed man in the illicit drug trade, he had a good year he sold 1.1 million amphetamine pills, five ounces of cocaine, and 100 pounds of marijuana. And like any other God-fearing, tax-paying American business owner, he wanted to deduct standard business expenses.
On his tax return, Edmondson recorded $105,300 in costs related to selling speed, weed, and coke during the taxable year of 1974. He also itemized two-thirds of the 29,000 miles he put on his car that year, $250 for a flight to San Diego, and $200 for food and entertainment expenses during a business trip. There was also $50 for a scale, $200 for packaging supplies, and $180 in long distance phone calls. Since Ed
Highlights
Section 280E of the Internal Revenue Code (Code) prohibits the
deduction of business expenses when the trade or business consists
of trafficking in controlled substances.
As cannabis continues to be legalized and regulated at the
state level, marijuana (i.e., cannabis) remains an illegal
controlled substance at the federal level subject to the
prohibitions of Section 280E.
The IRS continues to audit and litigate against businesses
trafficking in controlled substances (within the meaning of Section
280E).
As Congress continues to deliberate the federal legalization of
marijuana, the cannabis industry continues to face scrutiny from
the IRS under Section 280E of the Internal Revenue Code (Code).
IRS Continues to Audit and Litigate Against Cannabis Businesses | Holland & Knight LLP jdsupra.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from jdsupra.com Daily Mail and Mail on Sunday newspapers.
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To change its method of accounting, a taxpayer must receive consent from the IRS and should provide evidence showing the change in business activity, so that the IRS can confirm that the change in method of accounting will accurately reflect income.
While it remains illegal to buy and sell cannabis under the federal Controlled Substances Act, the IRS collects income taxes from cannabis businesses, which largely operate under various state laws. By selling a Schedule I controlled substance, cannabis businesses are largely restricted from claiming business expense deductions and certain costs of goods sold (COGS) to reduce their tax liability. Failing to properly report and pay income tax can lead to hefty penalties, so it is important for cannabis business owners to be aware of Internal Revenue Code (IRC) provisions and IRS regulations that impact the reporting of cannabis-related income and expenses.