Cannabis Taxpayers, The IRS Is Here To Help

For the past year, the Internal Revenue Service (IRS) has directed its attention to the cannabis industry– in a helpful way! This includes promulgation of cannabis tax guidelines as well as webinars and public forums dedicated to tax compliance for marijuana businesses (together, the “Guidelines”). The stated IRS goal here is “to positively impact filing and paying and reporting compliance on the part of all cannabis businesses to keep audits to a minimum.”

This IRS effort began last fall when the federal agency added a “Marijuana Industry” page to its website, dedicated to tax policy for cannabis companies. Since then, the IRS has added information and resources to this page, including an FAQ and tips covering a wide range of information. This includes income reporting, Internal Revenue Code (IRC) Section 280E guidance, cash payment options, and good recordkeeping.

Marijuana-Related Income Is Taxable Income

Although marijuana remains a Schedule I substance under the federal Controlled Substances Act (CSA), cannabis-related income is taxable under Section 61 of the IRC. Indeed, federal courts have consistently upheld that income derived from state compliant as well as illegal marijuana business activities are subject to U.S. federal income tax. See Olive v. Commissioner, 792 F.3d 1146 (9th Cir. 2015); Feinberg v. Commissioner, 916 F.3d 1330 (10th Cir. 2019); and Beck v. Commissioner, T.C. Memo. 2015-149, to name a few.

Some Marijuana-Related Expenses Are Deductible

The Guidelines discuss the limitations to which marijuana companies are subject pursuant to Section 280E of the IRC. In a nutshell, Section 280E denies deductions and credits for amounts paid or incurred in carrying on the trade or business of trafficking controlled substances (within the meaning of Schedules I and II of the CSA) in violation of federal or state law. Consistent with marijuana’s classification as a Schedule I controlled substance, Section 280E bars cannabis taxpayers from taking tax deductions and claiming tax credits attributable to their businesses.

Nevertheless, cannabis taxpayers subject to Section 280E may deduct their cost of goods sold (COGS) when determining their gross income, in accordance with Section 471 of the IRC. In its Guidelines, the IRS acknowledges the confusion surrounding Section 218E and explains that while normal overhead expenses, such as advertising expenses, wages and salaries, and travel expenses are not deductible, the cost of obtaining the business inventory is deductible.

This is an important statement from the IRS. Until the release of its Guidelines, it had offered little to no tax guidance about the application of Section 280E. This uncertainly denied many cannabis taxpayers the opportunity to structure their business operations in a way that mitigates the impact of Section 280E, with any certainty.

Cash Payment Options and Large Cash Amounts

Another strong emphasis in the Guidelines pertains to cash. Specifically, the Guidelines recognize the challenges faced by the cannabis industry in gaining access to banking services. The Guidelines affirms that the IRS makes cash payment options available for unbanked taxpayers.

In addition, the IRS reminds cannabis stakeholders of the need to reports cash receipts exceeding $10,000 in cash, in a single transaction and/or related transactions. The protocol requires filing Form 8300 within fifteen days following receipt of said payment. Operators also have an obligation to develop procedures reasonably designed to identify and report cash receipts, obtain and verify certain customer information and retain copies of forms filed for a period of five years.

The IRS “Cannabis/Marijuana Initiative”

In addition to promulgating these Guidelines, the IRS is launching a “Cannabis/Marijuana Initiative” to to train tax officials. The goals are to: 1) properly and consistently conduct audits within the industry, 2) work with stakeholders to ensure tax compliance, and 3) help identify and penalize non-compliant actors.

The IRS Really is Here to Help

The IRS cannot change marijuana’s status under the CSA, or repeal IRC Section 280E. Only Congress can do that.

And while Congress is struggling to legalize marijuana, federal agencies like the IRS are recognizing the legitimacy of this industry. These agencies are preparing for an inevitable policy shift (eventually) at the highest level of government. By leading these outreach efforts with its cannabis tax guidelines, the IRS conveys a desire to reduce tax uncertainties that have been plagued the industry.

For years now, cannabis taxpayers have been unjustly penalized for the discrepancy surrounding the legality of marijuana under state and federal law by being subjected to incredibly high federal income tax rates and cash tax liabilities that don’t align with their actual costs of operations. At least they now have the same type of guidance and services afforded to non-cannabis-related companies.

It’s nice to see that while much remains to be done to give the cannabis industry the chance it so-deserves to succeed and follow its course, the times they are – finally – a-changin’.

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Is Delta 8 federally legal?

Delta-8 is legal federally, and most state laws don't specifically address it. Due to ambiguities in the 2018 farm bill, which legalized hemp and hemp products, delta-8 is currently not prohibited by federal law.

What are the benefits of Delta 8?

In the human body, Delta-8 binds to the CB1 and CB2 receptors. Because it binds to both receptors simultaneously, users experience a milder cerebral high. When compared to the effects of THC, users describe a more clear-headed, productive, energetic, and upbeat feeling.

Is Delta 8 or CBD better?

Difference Between Delta-8 THC and CBD Delta-8 THC may not be as prominent as Delta-9 THC, but it is still among the predominant cannabinoids with psychoactive properties. However, CBD is NOT a psychotropic cannabinoid. While CBD can have better results in the long run, Delta-8 THC can give you a quick fix.

Can you fly with Delta 8?

Is it Legal to Fly with Delta-8-THC? Often, yes! It is legal to fly with Delta-8 when you are flying to and from areas where Delta-8 is legal, as long as the airline you choose doesn't specifically prohibit Delta-8 products.

Does Delta 8 help with anxiety?

Contains less than 0.3% Delta 9 THC. Good for chronic pain and anxiety relief. It does not cause paranoia or increased Anxiety.

Is Delta 8 a controlled substance?

Delta-8 is considered a Schedule 1 Controlled Substance by the US Drug Enforcement Administration (DEA) because it is known to cause psychoactive impairment to the consumer.

What is the difference between Delta-8 and Delta 9?

Delta-9 THC is a property of cannabis discovered all the way back in 1964. The primary difference between Delta-8 THC and Delta-9 THC is that Delta-8 is just a bit less psychoactive than Delta-9. This means that products with Delta-8 THC have a more gradual, and therefore more satisfying, effect on the consumer.

Does Delta-8 become 11 hydroxy?

Although in an edible form, Delta-8 THC can metabolize into a natural chemical called 11 Hydroxy tetrahydrocannabinol. Since 11 Hydroxy THC can only be absorbed through the liver, the molecule's possible psychoactive effects can last up to 6 to 8 hours during digestion.

Does Delta 8 make you sleepy?

According to the NCI, Delta-8 uniquely binds twice with cannabinoid receptors in the nervous system that play a role in sleep by calming down processes like breath, heart rate, and mental activity.

Does Delta 8 Flower get u high?

Delta-8 THC is one of the hottest topics in cannabis right now. It's a minor cannabinoid that can get you high like traditional THC, but much less so. Delta-8 found in small amounts in the cannabis plant and is often converted from other compounds like CBD.

How does Delta 8 affect the body?

5 benefits delta 8 could offer you According to the National Cancer Institute, delta-8 THC can bind to the CB1 receptor throughout the body. These receptors are part of our endocannabinoid system, which helps our body regulate and maintain homeostasis.

Does Delta 8 contain CBD?

Delta-8 is yet another compound derived from Cannabis sativa or the hemp plant. As you likely know by now, this is the same natural origin that CBD, THC, CBG, CBN, and CBC come from, too. Though all of these compounds are related to some degree, delta-8 is closest to CBD and delta-9 (also often known plainly as THC).

Does Delta 8 cause euphoria?

Delta-8 may not produce intense euphoria, but it will take effect pretty quickly. Depending on your mode of intake, of course, the time of impact will vary. If you vape it, you will experience the effects within 1 to 6 minutes. If you use a tincture, you will get the first effects after half an hour.

Is Delta 8 legal in all 50 states?

The Short Answer: Yes. Hemp-derived Delta-8 THC products, containing less than 0.3% D-9 THC is legal in all 50 states of the USA. But what if the extract contains more than 0.3% Delta-9 THC?

Can Delta 8 help you lose weight?

A research study from 2004 concluded that delta-8 helps increase appetite while promoting weight loss. This effect is certainly very unique, and scientists will do even more research on this subject. These effects might be due to the potential benefits delta-8 has on metabolism.

Does Delta 8 give you munchies?

Yes, Delta 8 can make you feel hungry. Delta 8 is an appetite-stimulating analogue of tetrahydrocannabinol (or THC). Of course this depends on the amount you smoke (vapes) or consume (edibles), but Delta 8 has been reported to stimulate your appetite, in some cases, even more than Delta 9 (marijuana).

Does Delta 8 make you laugh?

Whatever makes you laugh, Delta-8 is a great way to start the fun. In fact, we've developed Delta-8 products because we love to see people laugh.

What does Delta 8 convert to eating?

Delta-8 THC actually converts into delta-11 THC when processed through the digestive tract. Since delta-9 THC also converts into delta-11 THC when eaten, there's no special benefit to eating delta-8 THC. In general, research suggests that delta-8 has about two-thirds of the potency of delta-9.

Does Delta 8 affect your liver?

In the present study, we have demonstrated that Δ8-THCV exerted protective effects against liver I/R reperfusion damage by attenuating tissue injury, oxidative stress and inflammatory response.

Does Delta 8 make good edibles?

Our Delta-8-THC Gummies — Best for Beginners They contain 10 mg of delta-8-THC per gummy, which is a great dose to start your journey into edibles with. It will give you a relaxing buzz, and you can easily increase the dosage as needed. Our delta 8 gummies are made from a broad-spectrum hemp extract.

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