IRS on Medical Marijuana Dispensaries

In Washington and Colorado, marijuana is already legal and in 18 other states medicinal cannabis is already allowed. Of course, state-licensed dispensaries will be different in each of these lands. Legislatures and state voters are ok with this but it does not follow that the federal government has the same opinion, especially the IRS.

Robert W. Wood, Forbes contributor and tax attorney states that the IRS still sees these marijuana dispensaries as drug traffickers but they don’t have any deductions in their taxes. This hurts because businesses are paying their taxes on their net income not on their gross income. Since 1996, medical marijuana is already legal in California. Dispensaries have been fighting against intractable tax policies for years.

The judicial branch, in tax court, is allowing the purveyors to subtract other expenses definite from distributing marijuana which means cannabis outlets can subtract for a 2nd business of care giving. If 10% of the business’s premises are used, the company can deduct most of its rent.

IRS is also fighting for pot deductions in tax court. Martin Olive is a California businessman who is selling vaporizers at his shop. The IRS presented him a large bill and the tax court upheld it. The bottom line here is that dispensaries will walk a tight rope when it comes to IRS deductions. They need to assure the IRS that they are maintaining two businesses, one care giving—under one roof. Because of increased legalization, businesses have better chances to have their case for deductions be heard in federal courts.