Missouri cannabis tax law clause 280E may change with bill passed by state lawmakers The bill, which was passed by the Missouri state House on April 7 and is expected to be signed by Missouri Governor Jay Nixon, will allow patients to deduct medical cannabis from their state taxes.
The U.S. government has steadily increased their ‘war on drugs’ for the past 40 years with little to show for it. This has resulted in over 1.2 million people being arrested for cannabis each year. And while the ‘war on drugs’ has increased in intensity, the U.S. cannabis industry is worth $10 billion and growing. This creates a clear disconnect between state and federal cannabis policy. News Article Teaser:Show Me lawmakers just passed a bill that would address the unfair Missouri tax laws that medical cannabis companies have complained about. If the governor signs the document, it will be a big step for the industry and the state. Missouri lawmakers passed this bill during the last legislative session to lower taxes for medical cannabis providers in the state. Missouri’s cannabis tax bill was almost unanimously approved by the legislature, but Governor Mike Parson still needs to sign it to make it official. If the bill passes, medical companies in the state will be able to deduct more business expenses to offset the cost of taxes. According to the wording of the bill, these would be normal and necessary business expenses that have always been prohibited to those who work with cannabis. This will ensure that the medical industry will be able to take deductions similar to those already allowed and encouraged in other markets, and will help struggling companies, especially after COVID. The new plan will put medical cannabis businesses on par with all other small businesses in the state when it comes to taxes, said Andrew Mullins, executive director of the Missouri Medical Cannabis Trade Association.
How a new bill would change cannabis tax laws in Missouri
The bill repeals 280E of Missouri’s tax code, which states that cannabis businesses are not eligible for these benefits. Since the industry has only been legal since 2018, companies have felt the pain this tax season. Missouri’s current cannabis tax law specifically states that expenses incurred in the conduct of a trade or business … consisting of the trade in controlled substances is not deductible because of the federal illegality of cannabis. Until cannabis is removed from List I and legalized or decriminalized by the U.S. government, the IRS can use this provision to prevent businesses from receiving an exemption. As a small business owner, can you imagine not being able to deduct all of your business expenses on your tax return? Senator Denny Hoskins said that during a Senate hearing. Not being able to deduct these expenses would significantly increase your taxes. If the bill passes and is signed by the governor, businesses will be able to claim a tax deduction equal to their expenses, even if they work with cannabis products. Some companies can even pay income taxes if they operate at a loss, says David Smith, an accountant in St. Louis County. Smith feels it is his duty to keep his doors open to the cannabis industry and work professionally with cannabis customers. Especially in the early stages, costs can outweigh revenues, says Nicholas Rinella, executive director of Hippos Cannabis in Missouri. He made the statement during a Senate hearing earlier this year on the issue, noting that cannabis companies are not making the kind of money they normally would in light of the recent pandemic and should be treated accordingly. According to Rinella, the level of taxes currently imposed on the cannabis industry limits the industry’s ability to serve patients, create jobs and reinvest in the communities in which it operates. We are not looking for special treatment, we just want to be treated like any other legitimate business. If this decision is made, legal medical cannabis businesses in Missouri will have a much easier time with taxation and be able to rebuild the industry. However, if the Governor does not act, the industry will continue to be inconvenienced by the imposition of these stringent taxes.