Accounting, Tax, IRS & Marijuana

Types of Business Expenses Scrutinized Under IRS 280E

IRS 280E State-legal marijuana businesses are allowed to deduct the Cost of Goods Sold (COGS) on their taxes. Also, since 2007, cannabis businesses have made deductions on their non-cannabis business activities. Most importantly, however, marijuana businesses have also followed guidance from section 471 of the IRC, which allows businesses to capitalize on certain indirect costs and deduct them under COGS. Depending on the type of marijuana business, these indirect costs can be sizable. Below are some business expenses that are scrutinized by the IRS under Section 280E.

• Employee salaries

• Utility costs such as electricity, internet and telephone service

• Health insurance premiums

• Marketing and advertising costs

• Repairs and maintenance

• Rental fees for facilities

• Routine repair and maintenance

• Payments to contractors