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The cannabis industry will pay $1.8 billion in excess taxes in 2022

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According to data from cannabis research firm Whitney Economics, the cannabis industry paid over $1.8 billion in additional taxes in 2022 alone. And spoiler alert: This article does not have a happy ending. Cision PR Newsletter Reports indicate that this figure is expected to jump to $2.1 billion in 2023.

like High times He writes continually, with deep frustration, that thus far the legal cannabis industry has been largely unsuccessful in creating an accessible business model. California, among other states, is experiencing an exodus of legal cannabis companies, such as The Jerry Garcia Brand LegacyHe left the state because of the high taxes and red tape. Despite ongoing efforts to help communities most affected by the war on drugs enter the legal market, if iconic brands can’t turn a profit, how does one begin life after the financial and mental turmoil of going to prison for a non-violent cannabis-related crime supposed to make a decent living ?

So why the exorbitant taxes on the cannabis business? Don’t forget that your prepared dishes and plant-based foods are still technically Schedule I substances, which means that according to federal officials, cannabis has “no currently accepted medical use and a high potential for abuse.” This is scientifically inaccurate and regression, not to mention hypocritical, as 38 states and Washington, D.C. currently have medical marijuana programs. Taxing people on the legal market suggests legalization is not the utopia we had hoped and may help the black market, which continues to thrive. Over-taxing legal cannabis companies not only hurts business owners, but it raises prices and thus alienates potential customers.

Cannabis companies are subject to federal tax provision 280E, which “punishes traffickers of Schedule I or II drugs by not allowing deductions for ‘normal and necessary’ business expenses — such as below-the-line deductions — after reducing gross receipts at cost of goods sold, or COGS, resulting in essentially to a federal income tax liability calculated on the basis of gross income, not net income,” according to the bloomberg tax.

If you squeeze the 280E over other cannabis business hurdles, such as difficulty in accessing banking services and regulations against any interstate trading, the result is that for many businesses it is impossible to make a profit in the legal cannabis business. Effective tax rates are often higher than 70% for cannabis retailers.

like Cision PR Newsletter Reports, as a result, 24.4% of the cannabis operators surveyed indicated that they are profitable. Things got worse last year. The figure was 42%. And although it’s tempting to blame the post-pandemic economy, other industries are actually thriving. According to BloombergIn 2022, US corporate earnings saw their largest margins since the 1950s.

As we warned earlier in this article, don’t expect the fiat market to experience a breakthrough and an improvement anytime soon. Whitney Economics publishes a survey later this month stating that the cannabis business is hanging by the skin of its teeth and should not expect a positive turnaround in the near future.

“The cannabis industry is in dire economic distress, and the current regulatory and tax environment is unsustainable, even in the short term,” says Beau Whitney, chief economist at Whitney Economics, according to a press release. He adds that many of the country’s markets are on the verge of systemic collapse. The report indicates that tax reform is the only solution to this problem. Under the right tax laws, the cannabis industry could generate billions — and not just for the government to collect taxes. Whitney Economics predicts that with appropriate reform of 280E and the cannabis policy, employment in the industry will increase, and economic activity will rise by $35.2 billion over ten years.

Reuters reports Three Senate Democrats introduced a bill to remove cannabis from the Controlled Substances Act in July of 2022, thus repealing code sec. 280 AH. The Cannabis Management and Opportunity Act imposes a higher excise tax of 25% on products sold by large cannabis companies. At the time of writing, it is still pending.

Grow guide for marijuana beginners.
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