The Phaserl


IRS Enlisted in the War on Legal Marijuana

by Philippe Gastonne, The Daily Bell:

If anyone needs another reason to hate the federal income tax and the agency that enforces it, this is a good one. The IRS bans marijuana sellers from deducting most business expenses, even though they are operating in full compliance with all state and local laws.

The federal Justice Department is also operating under guidance not to prosecute these businesses, though they are nominally illegal. This is not enough for the IRS, which apparently feels it must enforce the letter of the law even when the law is pointless.

An obscure tax code provision called “280E” says “illegal” drug traffickers can’t deduct their business expenses, such as rent and employee salaries. Yet, as if to show how irrational the law is, they can deduct their “cost of goods sold.” That means the marijuana.

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