Paying taxes in cash, marijuana companies have a lot to hash out with IRS

Marijuana grow house /Wikimedia Commons

Thousands of companies involved in the $6.7 billion US cannabis industry are forced by disparities in state and federal law to conduct nearly all transactions in cash.

By Clay Dillow | CNBC

It’s Tax Day. No company likes handing money over to the tax collector, but for Oakland-based Harborside Health, settling up with the Internal Revenue Service represents a unique kind of headache. Like many successful retail operations, Harborside — which brought in $44 million in revenue in 2016 — owes millions of dollars in taxes to federal, state and local governments. Unlike most other companies, Harborside has to count and hand-deliver those millions of dollars to the IRS and other authorities in cash.

That’s because legal marijuana businesses have to pay taxes under IRS code 280E, the same category reserved for illegal drug traffickers. Cannabis is categorized as a Schedule I substance under the Controlled Substances Act. While more than half of the states in the U.S. have legalized some form of medicinal marijuana, and several others have passed laws permitting recreational cannabis use, under federal drug laws the sale of cannabis remains illegal.


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