The Hartford Business Journal published an article based on an interview with me about the burgeoning adult-use cannabis industry in Connecticut. One aspect of the plant being considered federally illegal is it creates a substantial state tax burden to companies in the sector. Read the full version here.
As it states in the HBJ piece, part of the federal tax code prevents any business trafficking substances that are federally illegal from deducting business expenses. But the law applies by default to state taxes even when that state has legalized cannabis. Here is an excerpt from the article:
“The [Connecticut] legislature would have to enact legislation to decouple [state taxes] from Section 280E,” Claffey said, adding California took that step, and now allows cannabis companies to deduct non-COGS items.
As the framework exists now, 280E applies to state taxes incurred by cannabis companies in Connecticut.
Sales taxes for the adult-use cannabis market depend on what kind of cannabis the user is buying, Claffey said.