Cannabis businesses contending with the devastating effect of Section 280E already know they’re paying too much money in taxes every year, but a new report has quantified just how impactful the drug war era tax code is.
According to Whitney Economics, U.S. cannabis businesses in 2022 paid more than $1.8 billion in additional taxes compared to traditional, non-cannabis businesses, based on an impact analysis of federal taxes paid by the marijuana industry. With an effective tax rate that often exceeds 70% for cannabis retailers, Whitney Economics projects that number will rise to $2.1 billion in 2023.
“The cannabis industry is under extreme economic distress and the current regulatory and taxation environment is untenable, even in the short term,” Beau Whitney, chief economist at Whitney Economics, said in a press release.
The tax impact news comes at a time when cannabis businesses across North America are reeling from slowed growth and an unstable economy. According to Whitney Economics, only about 24% of cannabis operators surveyed are profitable, down from about 42% that were in the black last year.
— Garrett Rudolph