This article was originally written for Marijuana Micro Business. Please visit MarijuanaMicroBusiness.com for more information.
Are you considering operating a marijuana microbusiness under the Michigan Regulation and Taxation of Marihuana Act (MRTMA)? If so, having an understanding of financial and tax implications in this regulated industry is critical for success. Tax regulations, such as IRS code section 280E, have a significant impact on income tax expense for marijuana businesses. Marijuana microbusiness license holders should be aware of and plan for potential tax consequences of §280E.
How does § 280E specifically effect marijuana microbusinesses?
Under the MRTMA, marijuana microbusiness license holders can cultivate, process and sell marijuana products produced at their business location. The cultivating, processing, and retail components of a marijuana microbusiness will each have different types of costs. While many of these costs may be considered cost of goods sold, or “COGS”, other will not be. Costs that are not considered to be part of COGS are not deductible for federal income tax purposes. A marijuana microbusiness should carefully plan for and understand any restrictions on the deductibility of its costs.
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