How to stop the “Free pot with purchase of pipe” scam that tries to beat a percentage of price tax, a new HuffPo article: Bungling Bundling? Taxing Marijuana in Washington State: Here or http://www.huffingtonpost.com/pat-oglesby/bungling-bundling-axing-m_b_7918092.html, Pasted below, too. Continue reading Bungling Bundling?
This is so preliminary . . . but here goes. Lots of thinking remains to do.
So Washington state went and changed its entire cannabis tax, with part of the rationale being to make the entire tax burden deductible under 280E. That’s why Washington transferred the burden from the seller (who arguably included the tax in income and couldn’t deduct it) to the buyer, who suffered no 280E problem. You can read about WA’s rationale at https://newrevenue.org/2014/12/04/wa-fix-for-280e-problem/.
Now the IRS says that Washington’s cannabis taxes were never, ever included in income. That result makes total sense. It not just comports with the statute, it avoids an irrational form-over-substance distinction, which would have made the tax a problem only if the seller paid, but not if the buyer paid. That would have been pointless.
So now what for 280E? I saw the thought somewhere that this IRS announcement portends loosening of 280E. Maybe. For sure, when the idea of repealing 280E comes up, the revenue estimate won’t reflect a huge loss from allowing deductions for state taxes, because they are deductible under the base line.
Putting a 280E penalty on state taxes would have been an outrage. But what’s left of 280E is more defensible now that state taxes are clearly deductible. Advertising is a frill for marijuana legalization, but anathema to opponents. More here