Having made the streets safe for Truth, Justice, and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio.
The patchwork, state-by-state legalization of marijuana in the U.S.
People don’t consider their local marijuana dispensary owner to be anything like the guy hauling kilos of cocaine across the ocean in a cigarette boat and evading the Coast Guard.
The offending section of the tax code is Section 280e, which allows a cannabis business to deduct only the expenses directly related to sales of product, and not those associated with carrying on the actual business.
All this means a marijuana company is being taxed on its gross profits rather than operating income, which could make its effective tax rate well more than double a similarly structured business not in the cannabis industry.
While not perfect, it serves as shorthand for investors evaluating a business — and since marijuana companies are not able to deduct any of the listed expenses, they are put at a disadvantage.
All this is why many marijuana companies don’t operate in the U.S.
Even though they’re Canadian companies subject to Canadian taxes, because they operate state-level legal cannabis businesses in the U.S., they are taxed a second time as U.S.