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Legal marijuana shops targeted by IRS, often forced to give 70 percent or more of their profits to the federal government


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(NaturalNews) On November 4, the citizens of Alaska, Oregon and Washington, D.C., voted to legalize marijuana for recreational use. But unless Congress acts to reform or repeal War on Drugs-era federal tax laws, businesses that wish to sell marijuana may find it nearly impossible to survive.

As marijuana vendors in Washington and Colorado (where recreational pot is already legal) are finding out, the outdated tax codes make it extremely difficult to make a profit.

The tax code known as 280E, which was introduced in the 1980s at the height of the War on Drugs, says that businesses which sell Schedule I or Schedule II drugs -- which include marijuana as well as heroin, cocaine and other substances -- cannot deduct most of their business expenses.

This means that many of the pot shops are forced to give 70 percent or more of their profits to the federal government.

USA Today reports:

The rule means that the "costs of the product," like the soil and fertilizer used to grow plants, are deductible. But the "costs of selling," like advertising, rent and utilities -- even salaries for employees -- are not deductible.

The tax code is not only unfair; it's also complicated, leaving many new vendors wondering exactly how much they will be forced to pay when their taxes are due.

Some pot shop owners in Colorado and Washington have already ended up with tax bills that swallowed up to 90 percent or more of their profits, leaving them unsure of whether they can afford to stay in business at all.

Lawmakers in several states have asked the IRS to stop enforcing the tax code, but the agency has only responded with a letter informing them that it would require Congressional action to "amend either the Internal Revenue Code or the Controlled Substance Act."

Mac Clouse, finance professor at the University of Denver, said:

The problem is that we have passed laws that allowed these medical marijuana and recreational marijuana companies to do business. But we have all these other laws, tax laws, federal laws that make it incredibly difficult if not utterly impossible to survive.

It appears to many in the fledgling marijuana industry that the federal government is using the outdated tax code to prevent their businesses from flourishing.

This effectively protects those who grow and sell marijuana illegally and, perhaps more importantly (to those in power who receive money from lobbyists), it protects Big Pharma companies who make billions of dollars from the opioid painkillers already on the market.

These painkillers -- like Oxycontin -- are overprescribed and are highly addictive. They are also very dangerous, causing more overdose deaths each year than heroin, and they have created an illegal black market of their own.

Another USA Today article reports:

Nationally, more than 22,000 Americans died of prescription drug overdoses in 2012, and more than 16,000 of the deaths involved opioids, according to the latest statistics from the U.S. Centers for Disease Control and Prevention. Drug overdoses were the leading cause of injury death.

It's important to keep in mind that no one has ever died from an overdose of marijuana. Its therapeutic and pain-killing properties have been proven in many studies. And as far as the recreational use of the herb is concerned, marijuana is far safer than alcohol -- 88,000 people die each year from excessive alcohol use in the U.S. alone.

It's time for the federal government to recognize the facts and change the tax codes accordingly -- it's highly likely that marijuana will be legalized in other states in the coming years, and someday perhaps in all of them.

Sources:

http://www.usatoday.com

http://www.usatoday.com

http://www.cdc.gov
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