How craft growers might work around 280E

I don’t work for marijuana sellers, so why should I give them free advice?  Because I want to keep their ads and promotion non-tax-deductible under 280E.  Ads irritate parents, favor Big Business, and stimulate demand.  They are a frill for consumers.

But even without ads, cannabis sellers have an easy, low after-tax cost way to show customers their products are special.

The customer walks into the retail store, and sees a live feed of suppliers’ grows. Sophisticated consumers these days want to know about provenance.  In an episode of Portlandia, after the server describes the free-range origin of the chicken on the menu, the provenance discussion ends up with the chicken’s name.

Many states require video feeds of cannabis grows, so only new costs are the new uplink and a monitor showing the live feed. That’s not deductible, but it’s not a big cost.  Provenance information about cannabis can add value at ultra-low cost.  The expense of setting up the video monitor seems to me a legally required element of cost of goods sold, so it’s deductible.  Maybe growers aren’t taking that tax return position, but it seems OK from afar.  I’ve maintained since 2013 that 280E is overbroad; advertising and marketing could remain non-deductible, but other expenses could be written off.   But in any event, the incremental cost of the new marketing effort (the video feed at the retail store) is tiny.

People get to watch their front doors on vacation at nominal cost.  This is the same kind of watching.  Customers see what they are getting – seed to sale.  They see an operation the proud grower wants customers to appreciate.

This marketing work-around of 280E helps craft growers – and their distributors – rather than Big Marijuana.  It won’t boost sales as well as expensive ads and tobacco-like Power Walls, but there are plenty of ways to promote product without Billboards and TV Ads.

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