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Pot Industry Running Out of Ways to Dodge Drug War-Era Tax Policy

March 8, 2019, 9:46 AM

The cannabis industry has repeatedly tried to avoid a part of the tax code that doesn’t allow for ordinary business deductions—and drives effective tax rates above 70 percent. It is hitting a lot of dead ends.

Section 280E, added to the code by a Drug War-era law, bars state-legal businesses involved in the trafficking of federally illegal controlled substances from writing off the costs of providing benefits to their employees, capital purchases, and other expenses. Lawmakers allowed them to reduce their taxable income by an amount known as the cost of goods sold, which includes the cost of a ...