Marijuana Industry Taxation: "Illegal" Income Reporting and Deductions

From growers to buyers, compliance with federal and state tax laws is complicated. Marijuana-related businesses face higher tax rates and tax burdens than other businesses, and business owners face the possibility of criminal and civil prosecution by federal and state tax authorities for failing to comply with all tax laws.

Restrictions placed on medical marijuana dispensaries affect the ability to do business. Therefore, those in the business better know their tax business (or hire someone who does):

Al Capone’s Legacy: The Taxation of “Illegal” Income

The Internal Revenue Code (IRC) requires that everyone file an income tax return if their gross income meets a certain threshold – even if that income was made illegally. As early as 1927, the Supreme Court ruled that income from illegal activities are subject to income tax (see United States v. Sullivan—this was the basis for Al Capone’s conviction for tax evasion when all other attempts to convict him had failed). It has become increasingly difficult to make a living in this trade due to restrictions placed on marijuana-related businesses, such as:

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