A U.S. Tax Court judge recently did not allow an owner of a Colorado medical marijuana to take business deductions for her expenses in selling accessory merchandise such as pipes and papers – as opposed to cannabis products.
Section 280E of the U.S Tax code prevents businesses based on controlled substances sector, which includes marijuana on a federal level, from receiving the same benefits as those in other sectors.
The request by Altermeds, a medical marijuana business in Louisville, Colorado, was denied by U.S Tax Court Judge Richard Morrison. He explained that the items were not covered by Section 280E.
Henry Wykowski, attorney for Altermeds explained that the decision only applies to this case.
“It does not set a precedent. Nevertheless, it’s a disappointing case and illustrative of the difficulties the industry faces with many – but not all – of the judges in tax court.”
Wykowski stated he will review the matter and decide if to appeal.
He is also involved in another case whether Section 280E should apply to state-licensed marijuana businesses.
Unfortunately for the owner, the IRS claimed that her and her husband, who filed a joint return, owe a total of $391,242 in back taxes from 2010 and 2011.
In addition $78,248 is owed in penalties.