Marijuana is still illegal federally, yet state-legal marijuana companies still have to pay taxes to the federal government. As an industry, total sales were calculated at just under $13 billion and all companies combined paid the IRS $4.7 billion in taxes in 2017.
Due to the status of marijuana these businesses can’t claim the same deductions as businesses in other industries because of Section 280E of the U.S. tax code, Motley Fool notes. Essentially, businesses taking part in the sale of “illicit substances” can’t take corporate tax deductions that are allowed in other industries. This means that legally operating marijuana businesses are paying much more in taxes.
One reason the government might not want marijuana to become legal on a federal level is because it would significantly reduce the amount of tax collected from these federally-illegal marijuana businesses.
Federal legalization is a sticky situation, especially when it comes to taxation.