280E — Not Strictly Enforced

UPDATED April 20, 2016:  Code section 280E supposedly requires disallowance of all expenses other than cost of goods sold, but “[c]urrently, some IRS agents are accepting 280E allocations that disallow 20% to 25% of the expenses (other than Cost of Goods Sold).”   Continue reading “280E — Not Strictly Enforced”

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Marijuana taxes: Vertical integration and transfer pricing

Any commercial legalization of marijuana will face the issue of vertical integration.  The law can require it (as Colorado does in most cases), ban it (as Washington state does for producers and retailers), or tilt toward it or against it. Continue reading “Marijuana taxes: Vertical integration and transfer pricing”

Large cigars: The only federal ad valorem “sin” tax

Trying to figure out why one little federal excise tax is not based solely on weight, volume, or potency (alcohol content), I’ve been stumped  And I still am.  It’s the tax on large cigars — 52.75% of sales price but not to exceed $402.60 per 1,000.  The key advantage for expensive cigars is not the percentage base, but the 40-cent per unit cap — regardless of weight.  Meanwhile, it turns out that makers of small cigars, taxed, like cigarettes, at $1.01 per pack of 20, have deliberately increased their size to cross over into the “large cigar” category – and pay only the ad valorem tax.

Why do we have this unique tax base?   Continue reading “Large cigars: The only federal ad valorem “sin” tax”