280E and California Advertising

May 19, 2015 § Leave a comment

I assigned copyright, so the article is online here or http://marijuanalegalization.about.com/od/RelatedIssues/fl/Down-the-Rabbit-Hole-of-Cannabis-Taxation-and-Advertising.htm.  There’s no paywall.

 

 

What is Advertising? – Ways & Means and Rachel Barry  

May 18, 2015 § Leave a comment

While thinking about loosening 280E to allow tax deductions for everything but advertising, you need to define advertising.  This is in connection with an article on 280E as applied in California, here or http://marijuanalegalization.about.com/od/RelatedIssues/fl/Down-the-Rabbit-Hole-of-Cannabis-Taxation-and-Advertising.htm, where this post appears as a hot link.

Defining advertising, for tax purposes, has been done.  There have been lots of proposals to disallow deductions for advertising by requiring amortization of amounts paid to advertise. A recent one came from Republican Ways and Means Chair Dave Camp, and another came from Democratic Senate Finance Chair Max Baucus.  To make that reform happen, you need to define advertising.  (This is a Tax Reform staple.

« Read the rest of this entry »

Technicalities of California marijuana advertising discrepancy  

May 15, 2015 § Leave a comment

This is a technical explanation of California law that backs up an article here or http://marijuanalegalization.about.com/od/RelatedIssues/fl/Down-the-Rabbit-Hole-of-Cannabis-Taxation-and-Advertising.htm.  Corporations can deduct, on their California state income tax returns, their expenses for advertising and marketing marijuana.  But individual businesses cannot.  Pass-throughs to individuals, like S corporations and LLCs, don’t provide these deductions to individuals.

Since 1982, Federal Tax Code section 280E has said sellers of federally illegal drugs, like cannabis, can deduct only “cost of goods sold” – the cost of producing or buying the product.  California follows — “conforms” to — that federal law for individuals, but not for corporations.  « Read the rest of this entry »

A 7th way of picking growers

May 14, 2015 § Leave a comment

Picking Winners: Deciding Who Gets to Grow Marijuana Commercially, http://marijuanalegalization.about.com/od/ModelsofLegalization/fl/Picking-Winners-Deciding-Who-Gets-to-Grow-Marijuana-Commercially.htm, describes in detail six ways to pick winners, who get the privilege to grow:

  1. Self-selection (Responsible Ohio ballot ploy)
  2. Voucher privatization – Share the wealth
  3. Grandfathering existing growers
  4. Lottery
  5. Steep fees
  6. On the merits.

Professor Sam Kamin of the University of Denver Law School points out that Colorado has a seventh way « Read the rest of this entry »

The danger of retail-only taxes  

May 14, 2015 § Leave a comment

In Denver, total retail taxes on marijuana of 20.05 percent get beaten when a retail employee sells out the side door. The moral of this story, to me, is collect some tax early – like tobacco and alcohol taxes, collected from manufacturers.  At some point, a retail tax level is low enough that the danger of getting caught takes away much of the incentive to beat it.  « Read the rest of this entry »

Forbes reports on 280E

May 11, 2015 § Leave a comment

A Forbes article points to a bill, sponsored by Colorado Congressman Polis, that would tax marijuana at 50 percent of price. But that’s a 2013 bill, from the last Congress, so it’s officially dead.  We’ve learned a lot since 2013 about how much the market can bear at first.

UPDATE:  The Forbes website just added a reference to this year’s bill.  This year Congressman Polis is teaming up with Oregon Congressman Blumenauer to propose a lower rate, phased in, starting at 10 percent and ending at 25 percent in year five.  Details here. « Read the rest of this entry »

How scales in Colorado make its weight base work

May 6, 2015 § Leave a comment

Here’s my understanding of how Colorado implements its marijuana tax based on weight.  Many, many growers have to pay that tax, so it needs to be simple — and to be verifiable.

Colorado growers use cheap and accurate food scales like these:  http://thesweethome.com/reviews/best-kitchen-scale/ « Read the rest of this entry »

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