IRS Section 280E & Marijuana: Tax Limbo or Hell?

Colorado marijuana tax forms and money
Colorado tax forms


Cannabis complications for CPAs, clients and consumers.

By Justin P. Breidenbach

Providing a client with tax services can be hard work.  Things get especially difficult when an accountant becomes the bearer of bad news. It’s never easy informing a client that they owe unexpected or, what the client believes to be, unreasonable taxes.  Imagine a situation where you had to tell a client that their effective tax rate is 70%, 90%, or even exceeds 100%.

I expect some may be reading this and asking themselves, “What tax hell would require a taxpayer to pay an effective rate exceeding 100%?”  I am here to inform you that this does exist, and in the marijuana industry it is known as Section 280E.


A CPA’s Unexpected Journey into the Cannabis Industry

marijuana cannabis and dollars Dollarphotoclub_66817773 b

Accountants at a crossroads in serving clients in an emerging industry.

By Justin P. Breidenbach
Ohio Wesleyan University

Being a CPA and academic, it’s not unusual to answer unique questions related to accounting. Whether they’re questions about taxes, financial statements, internal controls, or just understanding operational efficiencies, people are usually trying to understand the various paths to success through the numbers — or they’re looking for a secret nugget of information that will keep more cash in their pocket.

Inquiries like that are all in a day’s work for an accountant. I’ve discovered that there are few surprises, and eventually the promise of a new and exciting question fades away.  Although I constantly tell people how accounting is more than just debits and credits, I feel like we all have times where monotony sneaks its way into our professional life.

That all changed for me two years ago, when I got a question that not only surprised me, but wasn’t easily answered without some extensive research.