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The sale of recreational marijuana may be legal in Colorado and Washington but the IRS is not giving those new businesses a break; a reasonable tax break that is. A tax law that was made to apply to illegal drug based businesses is still being applied to the now legal marijuana businesses.  Some of these businesses are just breaking evening, not allowed to claim standard business expenses (like rent ) and being slammed with up to a 75% federal income tax rate.

This 1982 provision to the tax code, known as 280E, stemmed from a successful attempt by a convicted drug trafficker to claim his yacht, weapons and bribes as businesses expenses.  280E prevents those selling illegal substances from deducting related expenses on their federal income taxes. Legal marijuana dispensaries are not illegal yet this tax code is still being imposed on them.

“The Internal Revenue Service did not respond to a request for comment. In a letter to a congressman in 2011, the agency said it was merely enforcing the law, and that Congress needs to change the law if it does not want medicinal marijuana dealers caught up in the provision”.

Marijuana dispensary businesses are fighting back with their 280E Reform.

An excerpt from the 280E Reform website reads:

Legitimate medical cannabis businesses want and expect to pay their fair share of taxes. In addition to federal taxes, dispensaries also pay state and/or local taxes. However, the IRS is now using 280E to stop medical cannabis businesses from making standard business deductions, which leaves them with a crushing tax bill they cannot afford. In a growing number of audits, the IRS is leaving dispensaries no recourse but to shut down – or move to the underground economy.

This punitive and outdated tax policy cannot stand. That’s why the 280E National Reform Team seeks volunteers to help educate people about the IRS campaign against medical cannabis providers. To develop a winning court strategy, we’re also asking supporters to contribute to the 280E legal defense fund.

We invite you to follow us on Facebook and Twitter, or sign up for one of our 280E Reform Tax Seminars. You can attend the National Conference Call and hear our progress by dialing 209-647-1000, password: 154639. Mark your calendar: The next 280E Reform conference call is April 5, 2013, at noon PST.

What are your thoughts on this? Do you think it’s fair?

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