Boston Business Journal | Cannabis leaders cheer Mass. tax code change to allow more deductions
Cannabis industry leaders are celebrating after the Massachusetts legislature passed, and Gov. Baker signed, a tax change that will effectively lower taxes paid by marijuana businesses so that they’re more in line with how other industries are taxed.
The bill, which passed at the end of the legislative session in July, could have long-term effects on economic growth in the industry. It decoupled Massachusetts’ tax code from the Internal Revenue’s Section 280E, which prohibits businesses from deducting ordinary business expenses from income associated with selling Schedule I or II controlled substances.
This particular tax code originated from a 1981 court case about a man convicted for selling cocaine, who deducted ordinary expenses under legal federal tax law. In the following year, Congress established 280E to prohibit other people selling drugs from repeating these actions.
Because cannabis is considered a Schedule I substance, cannabis businesses in Massachusetts have been unable to deduct expenses since the first dispensaries opened in 2018.
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