Federal tax court has ruled that dispensaries are not allowed the same tax breaks that are given to other businesses; including operational expenses such as rent, payroll and security. This is the latest move by the Obama administration in the crackdown on the legal use of marijuana.
The opinion was given by Tax Court Judge Diane L .Kroupa after a ruling in the case of Olive vs. Commissioner of Internal Revenue. The case revolved around federal tax code section 280E. In her opinion, Kroupa stated that the federal tax law. prohibits, “deducting any expense of a trade or business that consists of the trafficking of any controlled substance.” It does not matter that the business is being run legally by state and local laws.
In Olive vs. Commissioner of Internal Revenue, the owner of an establishment called The Viper Room argued that Tax Code 280E did not apply to him because he was running a legal establishment. He interpreted the code to mean that only illegal traffickers were exempt from business tax breaks. In her opinion Judge Kroupa stated, “We disagree that section 280E is that narrow…We therefore reject petitioners contention that section 280E does not apply because the Vapor Room was a legitimate operation under California law.”