For owners of marijuana businesses, April 15 is one big downer.
While most business owners rush to meet the federal tax deadline and cash in on a plethora of deductions, pot store owners and growers complain that they can’t write off a single expense, even if they have state licenses.
They want the law changed, saying it’s discriminatory and outdated as more states move to legalize marijuana.
“We don’t want special favors – we just want to be treated like businesspeople,” said Nick Cihlar of Bellingham, Wash., co-owner of Subdued Excitement Inc., a company in nearby Ferndale that grows marijuana for Washington state retailers.
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The ban on deductions by the Internal Revenue Service is in place for one reason: Congress has declared every pot transaction a felony.
Getting the law changed will be difficult, with legalization opponents arguing that it would be a mistake to give the pot industry any tax breaks.
“Like any special interest group, they’re after one thing: more money. . . . It’s particularly audacious to demand that the government allow you to deduct expenses when you’re breaking federal law,” said Kevin Sabet, president of the anti-legalization group Smart Approaches to Marijuana.
Derek Franklin, president of the Washington Association for Substance Abuse and Violence Prevention, said giving a tax break to marijuana businesses would only lower the price of the drug, making it easier to acquire. The idea “doesn’t make sense from a public health perspective,” and marijuana businesses should pay more to curb pot use among minors, he said.
Many pot store owners say high tax rates make it hard to enter the industry and to compete with underground drug dealers.
“If someone spends $100 in our store, $77 of it is going to some form of tax – that’s federal, state, sales, whatever,” said Tim Thompson, co-owner of a pot shop called Altitude in Prosser, Wash. “There’s a lot of people staying out of the recreational market because the black market is cheaper, and the reason is because of these taxes and lack of write-offs.”
Thompson said April 15 means “pain, a lot whole of pain.”
Washington state opened its first pot stores in July after voters legalized marijuana in 2012. Three other states – Colorado, Alaska and Oregon, along with the District of Columbia – have approved the drug for recreational use, while 23 states and the District of Columbia allow its use for medical reasons.
Overall, more than two-thirds of all Americans live in states that have approved marijuana use in some form.