An Internal Revenue Service code, Code 280E, that’s typically reserved for making drug traffickers pay taxes on their earnings also requires that they receive IRS penalties. The IRS doesn’t allow them to deduct business expenses when they file taxes. In addition to other codes, Code 280E makes it impossible for them to file any credits or deductions that involve revenues derived from controlled substance sales.
As noted by Clay Dillow for CNBC, with the creation of legal cannabis businesses that sell medical marijuana and products based on cannabis derivatives in many states, codes related to drug trafficking have caused a lot of problems because the government still recognizes marijuana as a controlled substance: All taxes from cannabis sales, whether legal or not, must be paid to the IRS is in cash. Many of these businesses make so much money that they literally have to give the Internal Revenue Service tens of thousands of dollars in cash to pay their taxes.
This situation creates many expensive problems for cannabis business owners and the IRS. Business owners typically can’t place the money in the bank because financial institutions do not want to risk that the sales might be illegal. They must also pay for extra security to help with the counting and transport of the money. The IRS must also waste valuable time and manpower counting, recounting and recording the cash.
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Law Offices of Darrin T. Mish, P.A.: Tax Attorney
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