Deductions on a Higher Plane: Medical Marijuana Business Expenses

Abstract

A discussion of the income tax deductibility of business expenses in the marijuana industry. Emphasis is placed upon those states in which medical marijuana, and now recreational marijuana, is legal under state law, even though it is still illegal under federal law. Current litigation, including the appeal of Olive v. Commissioner to the Ninth Circuit, is addressed.

Internal Revenue Code Section 280E, which denies business deductions other than costs of goods sold for those who traffic in controlled substances, should be repealed. Moreover, marijuana, in light of its documented medical use, should be removed from the schedule of controlled substances. Finally, until these steps are taken, the IRS and the Department of Justice should leave the medical and recreational marijuana industry alone.

Keywords: Taxation, Medical Marijuana, IRC 280E