The Costs of Growing Pot

U.S. companies large and small legally deduct the expenses of doing business from gross profits before paying income tax, but purveyors of marijuana (in states where possession is legal and where prescription marijuana is dispensed) can’t deduct those expenses and so wind up paying a much higher federal income tax than other businesses. As NPR reported in April, “Section 280E” of the tax code (enacted in 1982 to trap illegal drug traffickers into tax violations) hasn’t been changed to reflect state legalizations. The effect, experts told NPR, is that legal dispensaries wind up paying tax on gross receipts while all other legal businesses are taxed only on net receipts. The federal government continues to regard marijuana as illegal.