Knowledge and insight on how best to operate considering U.S. IRC 280E.
ELLO’s team of tax specialists and advisors help our clients navigate the complex issues involved in operating a cannabis business. One of the most challenging and costly operating concerns is the federal statutory framework for reporting deductible costs under Internal Revenue Code (IRC) 280E. ELLO can help our clients navigate this complexity and minimize their tax burden while remaining compliant with current laws and regulatory obligations.
Taxpayers are required to determine cost of goods sold (“COGS”) by utilizing the applicable inventory-costing regulations under (IRC) §471 as they existed when IRC §280E was enacted.
IRC section IRC §263A increased the types of costs that are includible in inventory. Under IRC §263A both resellers and producers are required to capitalize a portion of their service costs (payroll, legal, personnel functions). The IRS has issued CCH 201504011 taking the position that marijuana resellers and producers are not allowed to apply the provisions of §263A.