{"id":62,"date":"2021-02-04T20:00:50","date_gmt":"2021-02-04T20:00:50","guid":{"rendered":"https:\/\/cannabistaxattorney.us\/?page_id=62"},"modified":"2022-03-09T23:42:27","modified_gmt":"2022-03-09T23:42:27","slug":"280e-complimentary-food","status":"publish","type":"page","link":"https:\/\/cannabistaxattorney.us\/280e-complimentary-food\/","title":{"rendered":"280E Complimentary Food"},"content":{"rendered":"\n

Can Your Marijuana Dispensary Deduct Complimentary Food & Snacks?<\/h1>\n\n\n\n
\"Jin<\/figure>
Jin Kim<\/strong><\/i>
Law Office of Jin Kim<\/a><\/strong><\/br>Free Consultation<\/strong>
(916) 299-9913<\/a><\/strong><\/div>\n\n\n\n

Many Marijuana dispensaries provide complimentary food and refreshments.  After all, free snacks and drinks can encourage members to spend additional time in the dispensary, purchase additional products, and otherwise support sales.  However, while other businesses can easily deduct complimentary food and snacks, some marijuana dispensaries wonder whether they can in light of IRC 280E<\/a>.  <\/p>\n\n\n\n

Separate Trade or Business?<\/h2>\n\n\n\n

Some marijuana dispensaries have argued that their provision of complimentary food and drinks is part of a separate trade or business.\u00a0 After CHAMP<\/a>, that arguable second business often takes the form of \u2018caregiving\u2019 services, and the argument goes that the provision of complimentary food and beverages is part of the separate non-trafficking business of caregiving services whose deductions are not prohibited by 280E.\u00a0 Unfortunately, the tax courts have been skeptical of these arguments, often distinguishing<\/a> marijuana dispensaries with free food and drinks for clients from the CHAMP entity that had extensive caregiving services.\u00a0 At base, when the provision of free food and beverages compliments the primary revenue of marijuana sales, courts have often concluded that the dispensary is engaged in a single trade or business of trafficking in a controlled substance<\/a> and that the free food and drinks are an activity incident to the sole business of buying and selling marijuana.\u00a0 Accordingly, deductions for complimentary food and drinks are often denied pursuant IRC 280E.<\/p>\n\n\n\n

Olive v. Commissioner Bookstore Analogy<\/h3>\n\n\n\n

To illustrate why a marijuana dispensary with complimentary food and services is often engaged in a single business of trafficking in a controlled substance, the court in Olive v. Commissioner<\/em> gave the following analogy:<\/p>\n\n\n\n

Bookstore A sells books. It also provides some complimentary amenities: Patrons can sit in comfortable seating areas while considering whether to buy a book; they can drink coffee or tea and eat cookies, all of which the bookstore offers at no charge\u2026 The \u2018trade or business\u2019 of Bookstore A consists of selling books.  Its many amenities do not alter that conclusion; presumably, the owner hopes to attract buyers of books by creating an alluring atmosphere.  By Contrast, Bookstore B sells books but also sells coffee and pastries, which customers can consume in a cafe-like seating area.  Bookstore B has two \u2018trades or businesses,\u2019 one of which \u2018consists of\u2019 selling books and the other of which \u2018consists of\u2019 selling food and beverages.<\/p>Olive v. Commissioner<\/a>, Ninth Circuit Court of Appeals<\/cite><\/blockquote>\n\n\n\n

So, if my marijuana dispensary sells<\/em> food and drinks do I have a separate trade or business that qualifies for deductions?<\/h2>\n\n\n\n

The Bookstore analogy in Olive was utilized by the marijuana dispensary in Harborside to argue that their selling of branded clothing, hemp bags, books about marijuana, and marijuana paraphernalia was analogous to Bookstore B, and therefore a separate trade or business; unfortunately, the court disagreed.\u00a0 According to the Harborside decision<\/a>, the point of the analogy is to show that a free service that attracts customers is not a separate trade or business; the analogy doesn\u2019t mean that selling two things automatically means that a marijuana dispensary has two separate trades or businesses.\u00a0 In fitting with the analogy, the court considered Harborside\u2019s non-marijuana sales analogous to a Bookstore B that derived .5% of its revenue from selling stationery, bookmarks, and T-shirts with pictures of books on them, using the same employees, sales floor, management, ledgers, and business entity.\u00a0 Accordingly, even charging for what would otherwise be complementary foods and drinks won\u2019t automatically create a separate trade or business with deductible expenses.<\/p>\n","protected":false},"excerpt":{"rendered":"

Can Your Marijuana Dispensary Deduct Complimentary Food & Snacks? Jin KimLaw Office of Jin KimFree Consultation(916) 299-9913 Many Marijuana dispensaries provide complimentary food and refreshments.  After all, free snacks and drinks can encourage members to spend additional time in the dispensary, purchase additional products, and otherwise support sales.  However, while other businesses can easily deduct […]<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":9,"menu_order":0,"comment_status":"closed","ping_status":"closed","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\/62"}],"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=62"}],"version-history":[{"count":6,"href":"https:\/\/cannabistaxattorney.us\/wp-json\/wp\/v2\/pages\/62\/revisions"}],"predecessor-version":[{"id":357,"href":"https:\/\/cannabistaxattorney.us\/wp-json\/wp\/v2\/pages\/62\/revisions\/357"}],"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=62"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}