Cannabis on a tax return is complicated
Wenatchee World Business World
Author: Lindsey Weidenbach
Unless you’re filing for an extension, 2014 tax returns must be postmarked or transmitted for e-filing on Wednesday, April 15, 2015. For those businesses which produce, process and/or sell recreational cannabis, this tax return will probably be the first time that your business reports its income to the Internal Revenue Service.
Unfortunately, the Internal Revenue Service is still treating the Washington cannabis industry as an illegal market, which affects what is, and more significantly what is not, deductible.
The U.S. Supreme Court once cautioned that the purpose of the tax code is to tax income, not punish unlawful behavior. This principal is illustrated by Section 280E of the Internal Revenue Code which states:
No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.