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. 

Contact Rod Kight

Contact Rod Kight


Rod's Book "Cannabis Business Law"

Author of the first legal business primer for the cannabis industry.

Cannabis Business Law Articles


Are Precision Fermented Cannabinoids an Existential Threat to the Cannabis Industry? (Podcast)

By Rod Kight | September 15, 2021
Are Precision Fermented Cannabinoids (PFC) an Existential Threat to the Cannabis Industry? I am thrilled to have had an opportunity…

Rod Discusses Cannabis Banking, Taxation, Federal Legalization, and Mexico With CannaBiz Connect (Video)

By Rod Kight | July 16, 2021
I recently discussed cannabis banking, taxation, federal legalization, and cannabis legalization in Mexico with Earl Carruthers of CannaBiz Connect. You can watch the of our conversation video here.

Rod Discusses Psychedelics and Cannabis On “How to Launch an Industry” (Podcast)

By Rod Kight | June 21, 2021
“How to Launch an Industry”, created and hosted by my friends, Dr. Jahan Marcu and Dr. Nigam Arora, is one of the most intelligent and creative podcasts I’ve encountered about the psychedelics and cannabis industries. I was a recent guest on the June 14 episode, “Profit and Laws”. 

Rod Discusses the Changing Regulatory Environment of Cannabis (Podcast)

By Rod Kight | March 22, 2021
In this podcast, hosted by John Bruford of CBD-Intel, Rod discusses cannabis regulation in the US, including the new Administration, the FDA, state laws, and related topics.

Cannabis and Cars- Scientific and Legal Implications of Cannabis Use and Driving (Video)

By Rod Kight | February 16, 2021
In this video podcast, Rod discusses the intersection of law and science that arises from cannabis use and driving. Traditional DUI tests are primarily oriented towards detecting alcohol impairment. Do these tests work for cannabis impairment? If not, is it possible to create cannabis-specific testing protocols, and accompanying laws and regulations, that accurately measure impairment while not unjustly criminalizing unimpaired cannabis users? 


By Rod Kight | January 21, 2021
In this video, Rod discusses delta-8 THC, CBD and cannabis in Europe and Mexico, the role of international treaties in cannabis reform, California’s Proposition 65, and the FDA’s position on CBD, among other cannabis issues.

UN Holds Historic Cannabis Vote

By Rod Kight | December 2, 2020
A UN committee voted today on six proposals regarding cannabis. In addition to voting to remove cannabis from schedule IV, the Committee voted on five other related proposals.

Watch Rod on the Cannabinoid Connect Podcast (Video)

By Rod Kight | August 12, 2020
I recently had a wide-ranging discussion about cannabinoids, hemp, and marijuana with Kevin Carrillo of the Cannabinoid Connect podcast. Watch it here.

Medical Cannabis and Workers’ Compensation

By Rod Kight | June 30, 2020
Workers’ compensation cases are likely to continue highlighting the tension between federal and state cannabis laws.

Talking Cannabis (Podcast)

By Rod Kight | May 25, 2020
I recently had an in depth discussion with Maynard Breslow of Dank Discussions Podcast. We discussed a number of important topics currently facing the cannabis industry.

Medical Cannabis Clinical Evidence Is Becoming Immune To State Borders

By Rod Kight | May 15, 2020
A physician’s education about cannabis medicine, and her patient’s treatment options, should not depend on their state of residence. Patient access should be based on sound science and physicians should receive comprehensive and uniform education regardless of the state in which they practice.

Cannabis Impairment and Driving: Legal and Medical Considerations

By Rod Kight | April 1, 2020
The notion that impairment can be assumed or not based solely on specific concentrations of THC or its metabolites in a driver’s blood or urine is plainly wrong.

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Honors & Recognitions


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