As a self-employed man in the illicit drug trade, he had a good year—he sold 1.1 million amphetamine pills, five ounces of cocaine, and 100 pounds of marijuana.
He also itemized two-thirds of the 29,000 miles he put on his car that year, $250 for a flight to San Diego, and $200 for food and entertainment expenses during a business trip.
However, in 1982 Congress took aim at drug dealers like Edmondson and enacted 280E, a tax code that prevents businesses that traffic Schedule I or Schedule II controlled substances, which includes heroin, LSD, cannabis, cocaine, amphetamines and other drugs, from claiming standard business deductions.
Today, even though 17 states have legalized adult-use cannabis and 32 other states permit medical marijuana use in some form, cannabis retailers must pay taxes under 280E.
What’s interesting is that in 2013, the Justice Department, via the Cole Memo, advised federal prosecutors to stop spending resources to pursue cases on state-legal marijuana businesses.
Earlier this month, Marijuana Business Daily obtained hundreds of pages of documents from the IRS outlining how the agency has refined its training and methods to crack down on the industry.
One of Wykowski’s biggest wins was in 2007 when he successfully convinced the court that medical marijuana dispensary Californians Helping to Alleviate Medical Problems, Inc., known as CHAMP, should be able to deduct expenses that could reasonably be separated from the trafficking of marijuana.
In October 2019, the Tax Court ruled that Harborside owed $11 million in back taxes from 2007 to 2012.
I am a staff writer on the vices beat, covering cannabis, gambling and more.
Previously at Forbes, I covered the world’s richest people as a member of the wealth team.