The IRS continues to be one of the most antiquated, unyielding and illogical arms of the U.S. government. Plus they are corrupt of course – let’s not forget about Lois Lerner and the targeting of the Tea Party…
The latest example of this comes in the guise of “protecting” America by denying tax write offs to any person or business that happens to deal in “illegal” items, including drugs. This stems from a piece of tax code dubbed “280E” which states:
No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.
Which is just lovely, except that in many states marijuana is now either wholly legal, or medical marijuana is legal and purchasable through any number of legal retailers. As the Daily Bell points out, those businesses are now getting the sharp end of the stick as they try to write off perfectly legal business expenses that are still looked upon as “illegal” on a federal level by the IRS, and thus non-deductible.
Legal marijuana growers in Colorado, for instance, can deduct the cost of seeds and baby plants, fertilizer, growing lights and others directly related to producing the marijuana. When they go to sell the marijuana, however, nothing is deductible. The difference in taxes due is enormous.
Instead of paying, say, 30% on net profits, shops have to pay 30% of almost their entire gross revenue. Many are just now finding this out as they file their 2014 tax returns.
Another law bans marijuana businesses from the banking system, so they have to operate on cash for everything. The NYT story notes one Colorado business on which the IRS imposed a $30,000 penalty because he paid his payroll taxes in cash. The owner challenged the penalty and won. Others may not have been so lucky.
The cost of the IRS’ obstinate stance will surely be passed on to the consumer – another hidden “tax” courtesy of the U.S. government.
The IRS’ labyrinthian tax code has enough issues on it’s own without the question of legal vs. illegal businesses getting in the way of honest trade between citizens. Once legal marijuana was introduced, this issue should have been immediately resolved – it’s inexcusable that this has gone un-remedied, especially with this being top of mind on the political landscape. It’s a paradox that logic easily unravels, but that seems to be beyond the power of the IRS to resolve.
It makes it very obvious that those in power at the IRS – be it the disgraced Lois Lerner or the current IRS Commissioner John Koskinen – are completely out of touch, totally apathetic or utterly incompetent. Or all of the above.
– Looks like Fox News is once again playing “hide the Rand” in its poll results.
– College student calls out Jeb Bush – “Your brother created ISIS!” – video.
– Zero Hedge: Why any FED rate hike will be purely symbolic.
– Ben Carson lost a tooth at a campaign stop and it’s a must see.
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