{"id":2,"date":"2021-01-21T05:19:39","date_gmt":"2021-01-21T05:19:39","guid":{"rendered":"http:\/\/cannabistaxattorney.us\/?page_id=2"},"modified":"2022-03-09T23:15:27","modified_gmt":"2022-03-09T23:15:27","slug":"trafficking","status":"publish","type":"page","link":"https:\/\/cannabistaxattorney.us\/trafficking\/","title":{"rendered":"280E “Trafficking” In A Controlled Substance"},"content":{"rendered":"\n
\"Jin<\/figure>
Jin Kim<\/strong><\/i>
Law Office of Jin Kim<\/strong><\/br>Free Consultation<\/strong>
(916) 299-9913<\/a><\/strong><\/div>\n\n\n\n

If your cannabis business has been issued a notice of deficiency by the IRS disallowing deductions pursuant to IRC 280E, you may be wondering how your state-licensed dispensary is \u201ctrafficking<\/em>\u201d in a controlled substance that’s legal under state law\u00a0 After all, if your marijuana dispensary is licensed by the state, taxed by the state, and otherwise operates legally under state law, how can cannabis tax law<\/a> treat your state-licensed dispensary as being engaged in \u201ctrafficking\u201d under IRC 280E?<\/p>\n\n\n\n

Unfortunately for marijuana dispensaries and other businesses that buy and sell cannabis, tax courts have addressed this issue in several decisions. Under the wording of IRC 280E:<\/p>\n\n\n\n

\u201cNo deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking<\/em><\/strong> in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act<\/a>) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.\u201d<\/p>IRC 280E<\/a><\/cite><\/blockquote>\n\n\n\n

While tax courts note that \u201ctrafficking\u201d in controlled substances is not defined in IRC 280E, the courts have looked to other sections of the Internal Revenue Code, Controlled Substances Act, and even Webster\u2019s dictionary to define the term for purposes of 280E.<\/p>\n\n\n\n

How CHAMP Defined Trafficking<\/h2>\n\n\n\n

In CHAMP<\/a>, the taxpayer’s attorney argued that by supplying medical marijuana to patient members, the taxpayer was not \u201ctrafficking\u201d within the meaning of IRC 280E.\u00a0 Unfortunately, the court gave meaning to the term by referring to the verb \u201ctraffic\u201d in Webster\u2019s dictionary which is defined as \u201cto engage in commercial activity: buy and sell<\/strong> regularly<\/em>.\u201d\u00a0 With that expansive definition the court found that in supplying medical marijuana to its member patients, the marijuana dispensary was regularly buying and selling marijuana, and therefore \u201ctrafficking\u201d in a controlled substance within the context of 280E.<\/p>\n\n\n\n

How Other Cases Defined Trafficking<\/h2>\n\n\n\n

The CHAMP court\u2019s holding that dispensing medical marijuana pursuant to California law is \u2018trafficking\u2019 within the meaning of 280E was applied in Olive v. Commissioner<\/a> to deny deductions.  In a decision that proved just as unfortunate for the marijuana dispensary, the court in Alternative Health Care Advocates<\/a> looked to the Controlled Substances Act\u2019s definition of \u201cdispense\u201d as delivering a controlled substance to an ultimate user, and IRC 7208 which defined \u201ctrafficking\u201d in the context of criminal acts relating to stamps as knowingly or willfully buying, selling, offering for sale, or giving away washed or resorted stamps for use.  <\/p>\n\n\n\n

Since marijuana is a controlled substance within the meaning of Schedules 1 and 2 of the Controlled Substances Act, tax and appellate courts have concluded in several cases that marijuana dispensaries that sell marijuana are \u2018trafficking\u2019 in a controlled substance within the context of IRC 280E. <\/p>\n\n\n\n

Attorney Jin Kim is a tax attorney in Sacramento<\/a>, California. She represents cannabis businesses with tax debt against thewho owe the IRS, CDTFA, and other tax agencies. To schedule a free consultation with her office call (916) 299-9913.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

Jin KimLaw Office of Jin KimFree Consultation(916) 299-9913 If your cannabis business has been issued a notice of deficiency by the IRS disallowing deductions pursuant to IRC 280E, you may be wondering how your state-licensed dispensary is \u201ctrafficking\u201d in a controlled substance that’s legal under state law\u00a0 After all, if your marijuana dispensary is licensed […]<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":9,"menu_order":0,"comment_status":"closed","ping_status":"open","template":"","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"featured_image_src":null,"featured_image_src_square":null,"_links":{"self":[{"href":"https:\/\/cannabistaxattorney.us\/wp-json\/wp\/v2\/pages\/2"}],"collection":[{"href":"https:\/\/cannabistaxattorney.us\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/cannabistaxattorney.us\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/cannabistaxattorney.us\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/cannabistaxattorney.us\/wp-json\/wp\/v2\/comments?post=2"}],"version-history":[{"count":8,"href":"https:\/\/cannabistaxattorney.us\/wp-json\/wp\/v2\/pages\/2\/revisions"}],"predecessor-version":[{"id":353,"href":"https:\/\/cannabistaxattorney.us\/wp-json\/wp\/v2\/pages\/2\/revisions\/353"}],"up":[{"embeddable":true,"href":"https:\/\/cannabistaxattorney.us\/wp-json\/wp\/v2\/pages\/9"}],"wp:attachment":[{"href":"https:\/\/cannabistaxattorney.us\/wp-json\/wp\/v2\/media?parent=2"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}