Using the IRS code against Legal weed sales

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Using the IRS code against Legal weed sales

Postby NewYork, New York » Tue Jul 28, 2:42 am

The anti legal marijuana movement will not stop in its efforts to rid the USA from the scourge of legal weed.

Big Pharma makes billions in profits peddling its products to millions of Americans.
Ditto for Liquor, Tobacco and Beer corporations.

We all know weed is the lesser of these evils. It isn't even close.

Prescription drugs, Booze and tobacco kill tens of thousands each year.
Weed? Zero deaths. This is RIDICULOUS

Read the article below how the US Tax code is trying to tax legal weed sales into oblivion.

This Court Ruling Has the Potential to Crush the Marijuana Industry
By Sean WilliamsPublished July 19, 2015Fool.com
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Source: Flickr user Mark.

Can anything slow down the marijuana movement?

Over the past 19 years we've gone from exactly zero states having legalized the distribution of marijuana for medical purposes to 23 states and counting that now allow marijuana to be prescribed by physicians to treat various end-of-life ailments (e.g. terminal cancers) and chronic conditions such as glaucoma. Within the past three years we've also seen four states (and Washington D.C.) pass legislation allowing for the legal sale of recreational marijuana.

Marijuana has multiple appeals, depending upon who you ask.

For the consumer, it represents freedom from federal laws, while for the sick it's an opportunity to receive therapy which could improve symptoms. Marijuana is currently being studied in a handful of disease indications ranging from type 2 diabetes to epilepsy.

For individual states, marijuana represents an opportunity to generate revenue through taxation, which could help to fill in budget shortfalls. Education is of particular interest for most states, with Colorado voters, for instance, going to the polls soon to decide whether the $58 million in collected marijuana tax revenue should be refunded to the states' growers and citizens, or if it'll primarily be put toward funding education.

Source: Flickr user Phil Roeder.

Marijuana meets its match
But earlier this month we learned that there very well may be something more powerful than the marijuana movement that could halt its growth: the Federal courts.

On July 9, 2015, in the case of Olive v. Commissioner, San Francisco's Ninth Circuit Court of Appeals upheld U.S. tax code section 280E which states that expenditures in connection with the illegal sale of drugs don't qualify for any deductions or credits. What this means is that marijuana-based businesses aren't able to deduct ordinary and necessary business expenses, and are thus being taxed on 100% of their gross profit as opposed to net profit.

As Forbes notes, even medical marijuana industries are running into a classic Catch-22. Either they avoid reporting certain gross profits to lower their tax bills and risk being prosecuted for tax evasion, or they report every cent of non-deductible gross profit and risk being prosecuted for selling a drug that's still considered to be illegal by the federal government.

The catch here is simple to understand: even if individual states pass laws legalizing marijuana and try to set up as friendly a business environment as possible for the marijuana industry, federal tax laws will continue to supersede state tax laws. Unless the IRS makes a change to Section 280E, there's veritably no way around paying taxes on gross profits for marijuana businesses -- and that could be devastating news.

Having to pay taxes on gross rather than net profits threatens to seriously eat into the profit margins of marijuana shops, and could threaten their ability to expand or even purchase new product. Seeing other marijuana businesses struggle to hang onto their profits may also deter consumers from applying to open their own shops.

Section 280E could also be a factor that banks use when determining whether or not to make loans to legal marijuana businesses. If marijuana businesses are unable to hang onto a significant portion of their profits because of the U.S. tax code, any loans to the industry could come with a markedly higher lending rate than ordinary businesses would receive.

One possible way around this for legal marijuana shops is to deduct expenses from clearly defined separate businesses. Medical marijuana shops, for example, can deduct expenses if they have separate care-giving businesses. Rent and other expenses may prove deductible, too, if the separate business activities dominate the medical marijuana practice. But without a second business, marijuana shops are exposed to the full brunt of the U.S. tax code.

The obstacles are mounting
Sadly for marijuana proponents, the Court of Appeals' decision to uphold the U.S. tax code represents just one of a series of obstacles to the marijuana industry.

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Re: Using the IRS code against Legal weed sales

Postby alpha » Tue Jul 28, 7:05 am

What Sean Williams fails to realize is that the ultimate loser here are the state coffers, not the businesses themselves. Before medical and legal dispensaries, virtually all 'businesses' were operated tax free. Once the states get a taste of what taxable income from weed sales can generate they'll be less likely to want to end that relationship, nor have it blackmailed by the the feds.

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Re: Using the IRS code against Legal weed sales

Postby modern roots » Sun Oct 04, 6:32 pm

It wouldn't bother me if a group of people got together and shut down the IRS yesterday. All the IRS ever did was steal from and harass hard working people.
Americans can have social security (FICA) withheld from their paychecks without the IRS.
All levels of government will eventually prostitute themselves out to weed if they can make a half cent from it.


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