280E is a part of the Internal Revenue code that specifically affects cannabis businesses. The official IRS 280E tax code states:
No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.
Generally speaking, it disallows tax deductions for normal business expenses, such as advertising, office expenses, rent, utilities, and payroll expenses. The tax consequences of disallowing deductions can be substantial.
We can help protect you from 280E by using other sections of the tax code, court cases, and inventory methods which can help alleviate the unfair tax burden caused by 280E. Contact us to find out more details.