State Tax Implications of Cannabis
Currently, 46 states have laws permitting or decriminalizing cannabis or cannabis-based products for medical use. And 9 states: Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon, Vermont, Washington and the District of Columbia, have legalized recreational cannabis. As states continue to legalize cannabis and the growing, production and use of cannabis increases, taxation of cannabis is ever more murky, particularly as it relates to the interplay between federal and state taxation.
Investors and businesses that are deemed to be in cannabis need to consider the classification of cannabis as medical or recreational use; the numerous cannabis sales tax implications; and the repercussions of the disallowance of deductions and credits related to the trafficking of a controlled substance.