280E (Internal Revenue Code Section 280E)

Section 280E of the Internal Revenue Code prohibits businesses involved in illegal drug trafficking from deducting business expenses on their taxes, except for the cost of goods sold. This means that, even if the business is legal in their jurisdiction (such as a licensed cannabis dispensary in a state where it's legal), they cannot deduct typical expenses like rent, salaries, or utilities related to their operation. As a result, these businesses face higher tax burdens, paying taxes on gross revenue without the benefit of many deductions that other legal businesses can claim.