Cannabis Business Law
Legal thought leadership for the cannabis industry
backed by nearly two decades of experience.
Thought Leadership for the Hemp and Cannabis Industries
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Cannabis Business Law
From cultivation to banking to testing to commerce, we focus on the issues facing the cannabis industry. Cannabis law encompasses a wide array of issues and areas. It is constantly evolving. Not only do we stay abreast of changes affecting the cannabis industry, we work hard to provide thought leadership to drive, direct, and influence positive change. We take our work and our clients’ needs seriously. We want to form lasting relationships with our clients so that we know and can help guide them through changes, both internal and external.
Here is an excerpt about Internal Revenue Code section 280E, easily one of the most difficult issues affecting the cannabis industry. It is from my book, Cannabis Business Law-What You Need to Know:
Tax issues can be boring and tedious. But understanding them is crucial to the survival of your cannabis business. So pay attention.
Section 280E of the Internal Revenue Code (IRC)9 does not allow an otherwise legal cannabis business to deduct its ordinary business costs for purposes of determining its taxable income. It does allow deductions for costs of goods sold; however, routine and necessary expenses such as rent, payroll, and marketing cannot be deducted. It is reasonable to assume that this is the case with all illegal businesses, such as gambling, prostitution, human trafficking, military arms sales, and so on. This is a reasonable assumption to make simply because it is easy to picture Congress not wanting to give any illegal business a break on, of all things, its tax liability. But your assumption would be wrong. All of those illegal businesses, and most any other illegal enterprise that you can think of, can deduct ordinary business costs. (This assumes, of course, that they voluntarily file tax returns or are busted and then taxed on their revenues.) But cannabis business owners may not. Illegal drug traffickers are singled out. Importantly, even drug traffickers who are operating in compliance with state law and so are, at least “pseudo-legal” may not deduct their business expenses. Why?
Congress, at the height of the anti-drug zeal of the 1980s, unequivocally decided that drug dealers were a special breed of intolerable citizens and should not get the benefit of basic tax laws that even murderers and gangsters enjoy. It enacted section 280E10 in 1982 after an important Supreme Court decision that I will discuss in a moment.
Given the present-day status of affairs, when “drug dealers” include scrupulous businessmen and women who report their income, pay taxes, and otherwise take the time and energy to ensure that they comply with detailed state regulations, the fact that marijuana businesses cannot deduct business expenses but human traffickers can is absurd in the extreme. But that is the state of the law, at least as of this writing.
Here is what section 280E 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.”
The Senate Finance Committee Report commented on the section as follows:
“To allow drug dealers the benefit of business expense deductions at the same time that the U.S. and its citizens are losing billions of dollars per year to such persons is not compelled by the fact that such deductions are allowed to other, legal, enterprises. Such deductions must be disallowed on public policy grounds....To preclude possible challenges on constitutional grounds, the adjustment to gross receipts with respect to effective costs of goods sold is not affected by this provision of the bill.”
Neither section 280E11 itself or the Senate Finance Committee Report explain why drug traffickers are treated differently from other criminal enterprises. To explain why, I will need to give a short history lesson.
Rod's Book "Cannabis Business Law"
Cannabis Business Law Articles
Hemp industry professionals want, (and more importantly consumers deserve) accountability, and a standard set of protocols that they can follow to ensure that hemp and CBD products are safe, and contain CBD in concentrations that match their labels.
On the west coast, the term “cannabis” is quickly replacing “marijuana” as the preferred term. While this may be proper and laudable from a botanical and historical perspective, it muddies the water when analyzing legal issues.
I recently talked cannabis law with attorney Tom Howard. We discussed cannabis law, CBD, THC testing, marijuana legal trivia, emerging trends, and lots of other things. Here’s the video.
The mouth swab drug test is commonly used by employers. Here’s what you need to know.
A WV federal court dismissed a case brought against hemp farmers, ruling that hemp is not a controlled substance and may be transported across state lines.
If Congress legislates a solution to the cannabis commerce problem it is difficult to envision cryptocurrencies gaining a foothold. But if Congress fails to act, cryptocurrencies may become intwined with future cannabis commerce.
All cannabis products come from cannabis plants, which necessarily grow from cannabis seeds. This article is a summary overview of the legal status of cannabis seeds in four select European countries, with a postscript about importing seeds into the USA.
Governments across the world, having become familiar with the health benefits of marijuana, are now legalizing cannabis use for medical patients. As a result, medical marijuana has become more mainstream than ever in the health industry.
According to all predictions the hemp and CBD industry is about to take off like a rocket ship.
I had a great time recently talking with award winning journalist Rhiannon Fionn, editor and publisher of the Carolina Cannabis News (CCN), for a recent podcast.
The cannabis industry is growing like a weed. Since 2016, US revenue from cannabis has almost doubled.
We are among the most experienced and knowledgeable firms in the cannabis industry. Full stop.
Honors & Recognitions
Board Certified Specialist in Consumer & Business Bankruptcy Law
Rod is a Board Certified Specialist in Business and Consumer Bankruptcy Law by the North Carolina Board of Legal Specialization. Rod is licensed to practice in North Carolina and Oregon.
Listed in North Carolina Super Lawyers and Super Lawyers Rising Stars
Rod was selected to North Carolina Super Lawyers Rising Stars in 2012 and to the North Carolina Super Lawyers main list since 2015
Recognized by Business North Carolina Legal Elite
Selected to Business North Carolina Legal Elite Bankruptcy Section 2016-2017
AVVO Superb Rated Lawyer
10.0 Rating on Avvo; 28 5-Star Client Reviews and counting.
Avvo Client Choice Award
Avvo Client Choice Award Recipient 2015
AV Preeminent Peer Rated Lawyer at Martindale Hubbell
AV Preeminent Peer Rated Lawyer by Martindale Hubbell since 2014
Included in Best Lawyers in America 2018
Selected to Best Lawyers in America 2018 and Best Lawyers in America 2017 Winter Business Edition