It’s Extremely Likely that 280E Is Destroying Your Cannabis Company

It’s not groundbreaking to say that cannabis taxes are a huge barrier to success in the cannabis industry. You’d be hard-pressed to scroll through ten cannabis industry-related messages on LinkedIn without encountering at least one that is lamenting the pain caused by the heavy-handed tax system.

To be clear, the complaints are well-justified — taxation of cannabis is a huge issue. However, most people seem to focus their energy on reforming state-level taxes (such as the excise and cultivation taxes in California), rather than on the real monster: Section 280E of the Internal Revenue Code. State-level taxes might make it a bit harder to compete against the black market, but 280E can take what would be a healthy, profitable company in another industry, and transform it into a cash incinerator.

Considering how impactful 280E is on profitability, it’s concerning that many operators aren’t intimately familiar with how 280E changes the game. I hope this article clarifies what 280E means for cannabis businesses, and what sort of normal business practices that are normal in other industries, could potentially devastate companies in the cannabis space — and thus, why they should be avoided like the plague.

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