Replies to post #47823 on Players Network Inc. (fka PNTV)

[lesgetrich]

Tax Code Section 280E states: there are no legitimate expenses that are chargable.

Like many things in the tax code there are always loopholes.

The majority of costs involved in the production of marijuana end user products is in the cultivation. A large portion of that is what are defined as tax deductible business expenses for federally legal corporations such as labor, cost of facilities or lease of land, purchase of equipment, taxes, etc. These deductions are not allowed for a marijuana or hemp/CBD business since these are still federally illegal substances. However, these businesses are allowed to deduct Cost Of Goods Sold (COGS) since this is not considered a business expense deduction but a means of determining profit...

Cannabis Business Expenses and the Code

The COGS is not a “deduction” within the meaning of the Code, but it is subtracted from the gross receipts of the business to determine its gross profit for the year; the costs included in COGS are recovered upon the sale of the product (as opposed to the tax year in which they were paid or incurred)...

...Interestingly, although the Code disallows deductions only for the expenses paid or incurred by a business in the illegal sale of drugs, it does not preclude a taxpayer from taking into account its COGS – in other words, the disallowance does not affect the COGS; if appropriate, the expense may still be included in the taxpayer’s COGS and may be subtracted in determining the taxpayer’s profits from the sale of the drug.