Taxes are almost never a simple thing to deal with, and when it comes to assessing state and federal taxes as they apply to your marijuana-related business, it can be very difficult to navigate. As more and more states develop laws regarding the production, manufacture and sale of marijuana and its related products, states are finding increased revenue through the taxation of marijuana. The federal government, on the other hand, remains open to states creating their own laws around the regulation of marijuana, though it is still an illegal substance to grow, possess or transport according to the U.S. Whether you are filing your taxes for the first time as a marijuana dispensary or you are simply wondering proactively about taxation issues before getting into the business, here is the information that you will need to keep in mind.
State Taxes on Marijuana
Provided that you reside in a state that has either decriminalized or legalized marijuana, or is in the process of doing so, you will find that paying state taxes on your marijuana business can be a fairly simple process. However, you may still wish to consult a business attorney or one who specializes in drug law so as to make sure that you are in full compliance with all the state regulations. Beyond having to pay state business taxes and all the associated taxes that go along with having any kind of business, your state will have laws in place that determine how much marijuana excise tax a retailer must pay to a producer and how much sales tax someone who purchases marijuana products must pay. Each state has different guidelines that you must pay special attention to if you have a license as a grower, manufacturer or retailer. For example, in Alaska, there is a $50 excise tax on every ounce of the plant sold from a grower to a distributor. In Colorado, this excise tax rate is 15 percent of the market price at the time. In some states, such as Oregon, there is also a 25 percent sales tax that applies to all marijuana purchases at licensed retail stores and dispensaries. In the state of Washington, those who hold marijuana licenses to grow, process or sell the drug are subject to the business and occupation tax. Each state that regulates the sale of marijuana should be able to answer any of your specific questions on the taxes that you are responsible for paying and collecting. Keep in mind that these tax structures are very volatile and constantly changing as legal marijuana is relatively new to the retail market.
Federal Taxes on Marijuana
Tax laws on marijuana businesses get complicated in the federal sector, since the nation’s government still views this plant as an illegal drug. Per a 1982 federal mandate, businesses involved in the sale of marijuana are engaged in drug trafficking and cannot enjoy the perks that other businesses can. While you may have a perfectly legal marijuana dispensary in the state of Colorado, for example, in the eyes of the federal government, you are practicing illegal dealings and therefore are not eligible for many of the standard tax credits, deductions and other benefits of a business. Still, it is important that you go through the process of reporting your marijuana business’s earnings as income on your federal taxes. If you don’t do this, you could be questioned by the Internal Revenue Service, audited and even prosecuted for tax evasion or the inaccurate declaration of income. Sorting out how to report income from this federally illegal, but state-legal, business venture may be a difficult job, and the laws regarding the growing and distribution of this drug are constantly shifting. Consider consulting with a business or drug law attorney to choose the best option for you when it comes to doing your taxes as a marijuana enterprise.
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