December 02, 2016

Taxes are a huge problem for those who are working in the marijuana industry. That’s because high tax bills frequently hit cannabis businesses. Often, marijuana excise taxes are being assessed along with the regular business taxes. Although some business owners of marijuana are fighting back, they usually lose.

One of the marijuana tax law problems is the IR Code Section 280E. It is a part of a tax rule that prevents businesses in the industry from writing off those standard business deductions. As a result, it created a high tax rate.

Cannabis is a controlled substance. Although the marijuana tax law denies any deductions, it allows cannabis business to continue to deduct a portion of their expenses which are covered by the Cost of Goods Sold (COGS). To maximize their deductions, marijuana business owners allocate their expenditures to COGS.

Another marijuana tax problem that cannabis dispensaries have to face is their cash nature business. Not all of their income is being reported. If the IRS accuses them of non-reporting of income, marijuana business owners are exposed to criminal and civil tax penalties. If these sanctions have hit you, you should seek the expertise of our tax lawyers who can defend you against these allegations by the IRS or the State.

The marijuana tax problems are not limited to tax audits conducted by the IRS. The California State Board of Equalizations may also perform auditing to some marijuana dispensaries who are not reporting their income for tax purposes. Without the right records, the BOE can easily make wild guesses. Even so, the cannabis dispensaries should prove to the BOE that its estimate is wrong. If failed to do so, they can become liable for all unpaid sales taxes.

But do not worry. Our tax attorneys have decades of experience in handling this type of sales tax problems. We can help you reduce your penalties as a result of marijuana tax law problems.

Marijuana businesses may also face payroll tax problems. That is, they have to identify their employees and independent contractors. If they decide wrongly in this area, they can be liable for payrolls taxes. Also, they are subject to further penalties if they fail to deposit payroll taxes.

If you are dealing with marijuana tax law problems, you should consult with an experienced tax lawyer who can give you the best advice on how to address them and avoid being penalized or paying huge fines. Consult with our experts today.  Give us a call for a free confidential consultation: 800-950-2237.

Posted in: Payroll Tax and Tax Law ProblemsTagged: Payroll Tax and Tax Law Problems

Updated: November 16, 2020 4:45 pm

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