{"id":286795,"date":"2019-10-16T15:08:04","date_gmt":"2019-10-16T20:08:04","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/cannabis-law\/starting-a-cannabis-business\/starting-a-marijuana-business-tax-issues-to-know.html"},"modified":"2025-08-14T13:24:10","modified_gmt":"2025-08-14T18:24:10","slug":"starting-a-marijuana-business-tax-issues-to-know","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/cannabis-law\/starting-a-cannabis-business\/starting-a-marijuana-business-tax-issues-to-know.html","title":{"rendered":"Tax Issues Related to Marijuana Businesses"},"content":{"rendered":"\n
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Tax Issues Related to Marijuana Businesses<\/h1>\n\n
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\n By Susan Buckner, J.D.<\/a> | Legally reviewed by Laura Temme, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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Key Takeaways<\/h2>\n

Cannabis businesses<\/span> face unique tax burdens<\/span> due to federal tax<\/span> rules that prohibit standard business deductions for marijuana companies since cannabis remains federally illegal. This means cannabis businesses<\/span> often pay taxes on gross revenue rather than net profit, creating effective tax rates<\/span> exceeding 70% in some cases. State excise taxes<\/span>, sales taxes<\/span>, and complex compliance requirements across federal, state, and local jurisdictions make professional tax and legal guidance essential for cannabis entrepreneurs.<\/p>\n\n <\/div>\n <\/div>\n<\/div>\n\n\n

Many states have legalized marijuana<\/a>\u00a0for medical use and recreational purposes. At the federal level, marijuana is still an illegal narcotic. The Controlled Substances Act allows law enforcement to prosecute sellers. However, the IRS requires businesses to declare all income for tax purposes.<\/p>\n

Legal marijuana businesses must pay sales tax, use tax, and excise taxes. The confusing relationship of federal, state, and local taxes can easily cut into the profit margin of marijuana business owners<\/a>.<\/p>\n

Understanding the state and federal tax laws<\/a> is essential for anyone planning on owning or operating a cannabis business<\/a>. In this article, we’ll explain the basics of business taxes in the cannabis industry.<\/p>\n

Each state has its own set of laws surrounding the sale of cannabis, so it’s best to consult a local cannabis law attorney<\/a> or a tax attorney<\/a> before beginning your business plan.<\/p>\n

Business Taxes and the Cannabis Business<\/h2>\n

Most cannabis companies are small businesses. Depending on their nature, small businesses can expect to pay taxes according to local and state tax codes<\/a>. For example, food service businesses pay different taxes on hot, ready-to-eat food versus food eaten in the establishment.<\/p>\n

In the case of cannabis businesses,<\/a> states typically have separate code sections for cannabis, and may have sections for:<\/p>\n