Well, there you go. This is sure to spur a lot more black market growers and sellers. Leave it to the feds to ruin a good thing.
Feds Slap 70% Tax on Legal Marijuana Businesses
A law passed in the ’80s to prevent drug dealers from getting tax breaks is now taking a huge chomp out of legitimate outfits in Colorado and Washington.
Legal marijuana sales in Colorado and Washington State have grossed billions, but legal dealers will see little of that thanks to a draconian federal law meant to punish street pushers.
In one of the first years of legal sales, 2015, Colorado moved
nearly $1 billion worth of marijuana and is estimated to take in $135 million in taxes on it. Meanwhile, Washington is expected to pull in
around $1 billion in revenue from sales taxes between 2015 and 2019. Despite technically being illegal on the federal level, these businesses must file taxes to the Internal Revenue Service—and they may pay as much as 70 percent in taxes to the feds.
That’s thanks to
Section 280E of the tax code. Congress passed the measure in 1982 so that businesses who are “trafficking in controlled substances” that are prohibited by federal law may not utilize many tax deductions and credits available to other businesses, like deducting rent and employee-related expenses. That means a marijuana business owner can pay an effective tax rate as high as
70 percent, as opposed to the more typical 30 percent rate.
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