Marijuana Business Can’t be Parsed

Because marijuana remains a federally-controlled substance, businesses operating legally under state law are still barred from deducting business expenses. One couple who ran a marijuana dispensary tried to get around this bar by arguing that the business also sold non-marijuana merchandise (pipes and papers) and should be allowed to deduct expenses related to it. The Tax Court said no. The non-marijuana merchandise complemented the efforts to sell marijuana and the expenses that would be attributable to a separate business were not separately identifiable. Marijuana businesses can only take into account the cost of goods sold in figuring their taxable income.