Internal Revenue Code Section 280E

Internal Revenue Code Section 280E is a tax law that prohibits businesses involved in the sale of illegal substances (specifically those classified under federal law, like cannabis) from deducting normal business expenses when calculating their taxable income. This means that while these businesses can still report income, they cannot offset that income with typical expenses such as salaries, rent, or utilities, leading to significantly higher tax burdens. Essentially, it limits the tax relief available to companies operating in a legal gray area under state law but still illegal federally.