The historical Boston Tea Party motto of “no taxation without representation” took on a new meaning on Wednesday when a major marijuana company marked the 250th anniversary of the act of civil disobedience by protesting federal code that prohibits the cannabis industry from making key tax deductions like other traditional businesses.
Dressed in colonial garb, executives and employees of the multi-state cannabis operator MariMed took to the Boston Harbor to raise attention to the Internal Revenue Service (IRS) code known as 280E. The stunt was a play on the December 1773 protest by early Bostonians over England’s monarchy raising the tax on tea, which involved pouring cases of the product into the sea.
As Congress works to advance a bipartisan marijuana banking bill, which advocates hope will be scheduled for a Senate Banking Committee vote this month, the company is highlighting another specific part of federal law that makes it so cannabis businesses are subject to significantly higher effective tax rates.
“Our protest was less about us and more to provide a voice for the entire industry,” MariMed CEO and President Jon Levine said in a press release. “Section 280E is unfair and hampers companies striving to make cannabis accessible for consumers and medical cannabis patients in all legal states. It should be repealed. Doing so would remove an obstacle to our mission to improve people’s lives every day through cannabis.”
While several states—including Connecticut, Illinois and New Jersey—have moved to provide state-level tax relief to their cannabis markets in recognition of the unique financial challenges they face under federal statute, the marijuana industry continues to incur higher tax rates under 280E.
However, at the congressional level, Rep. Earl Blumenauer (D-OR) reintroduced a bill in April that would amend the IRS code to allow state-legal marijuana businesses to finally take federal tax deductions that are available to companies in other industries.
He previously told Marijuana Moment that he’s “absolutely convinced when we are able to fully deduct their business expenses that there actually will be more revenue collected because people will comply fully with the law.”
As the Congressional Research Service (CRS) noted in a 2021 report, IRS “has offered little tax guidance about the application of Section 280E.”
IRS did provide some guidance in an update in 2020, explaining that while cannabis businesses can’t take standard deductions, 280E does not “prohibit a participant in the marijuana industry from reducing its gross receipts by its properly calculated cost of goods sold to determine its gross income.”
The IRS update seemed to be responsive to a Treasury Department internal watchdog report that was released in 2020. The department’s inspector general for tax administration had criticized IRS for failing to adequately advise taxpayers in the marijuana industry about compliance with federal tax laws. And it directed the agency to “develop and publicize guidance specific to the marijuana industry.”
Photo courtesy of MariMed and Angela Rowlings.