A bill to allow Missouri’s medical cannabis companies to deduct ordinary business expenses on their state tax returns is headed to Republican Gov. Mike Parson’s desk after near-unanimous legislative approval, St. Louis Public Radio reports.
The law is expected to ease the tax burden of licensed cannabis operators as they are not allowed to take such deductions on their federal filings due to cannabis’ Schedule I status.
The measure simply allows state-approved medical cannabis businesses to claim an income tax deduction in an amount equal to any expenditures which would otherwise be allowed as a federal income tax deduction.
David Smith, a certified public accountant who works with medical cannabis companies, told lawmakers during a hearing that existing law could mean effective tax rates for cannabusinesses of 70% or higher and “some companies may even be subject to income taxes while operating at a loss.”
Section 280E of the federal tax code does not allow “any trade or business…that consists of trafficking controlled substances” to deduct normal business expenses, whether or not their business is approved by the state.
During a Senate hearing last year, Ncholas Rinella, CEO of Hippos Cannabis, said the level of taxation “limits the industry’s ability to serve patients, supply jobs and reinvest in the communities” they serve.
The law is the first of its kind in the nation, despite Missouri only legalizing cannabis in 2018 – far behind the majority of states that have approved the reforms.
Exclusive offer from our sponsor:
Get daily news insights in your inbox. Subscribe