Section 280E

Section 280E is a tax law that prohibits businesses involved in trafficking controlled substances, like cannabis, from deducting expenses related to their sales when filing federal taxes. While they can deduct the cost of goods sold, other business expenses—such as rent, salaries, and marketing—are disallowed. This results in a higher overall tax burden for such businesses. The intent is to prevent drug traffickers from reducing taxable income, but it significantly impacts legal cannabis businesses, limiting their ability to deduct typical operational costs.