For the past year, the Internal Revenue Service (IRS) has directed its attention to the cannabis industry– in a helpful way! This includes promulgation of cannabis tax guidelines as well as webinars and public forums dedicated to tax compliance for marijuana businesses (together, the “Guidelines”). The stated IRS goal here is “to positively impact filing and paying and reporting compliance on the part of all cannabis businesses to keep audits to a minimum.”
This IRS effort began last fall when the federal agency added a “Marijuana Industry” page to its website, dedicated to tax policy for cannabis companies. Since then, the IRS has added information and resources to this page, including an FAQ and tips covering a wide range of information. This includes income reporting, Internal Revenue Code (IRC) Section 280E guidance, cash payment options, and good recordkeeping.
Marijuana-Related Income Is Taxable Income
Although marijuana remains a Schedule I substance under the federal Controlled Substances Act (CSA), cannabis-related income is taxable under Section 61 of the IRC. Indeed, federal courts have consistently upheld that income derived from state compliant as well as illegal marijuana business activities are subject to U.S. federal income tax. See Olive v. Commissioner, 792 F.3d 1146