Unfair Missouri Cannabis Tax Law Clause 280E May Change With Bill Passed By State Lawmakers

Lawmakers in the Show Me State just passed a bill that will help with an unfair Missouri cannabis tax law that medical cannabis businesses have been complaining about. If the governor signs off, this will be a huge step for the industry and the state.

Missouri lawmakers passed this bill during the last legislative session specifically to ease taxes that medical cannabis providers face in the state. The Missouri cannabis tax bill received “near unanimous approval” in the legislature, but Governor Mike Parson still needs to sign it into law for it to become official. 

If the bill passes, medical companies within the state will be able to deduct more business expenses in order to offset the cost of taxes. According to the wording of the bill, this would include “ordinary and necessary” business expenses that in the past have been prohibited for those who work with cannabis.

This will help the medical industry be able to take deductions similar to those already allowed and encouraged in other markets and help out the businesses that are struggling, especially following COVID.

This new plan will “put medical cannabis businesses on a level playing field with all other small businesses across the state when it comes to taxes,” said Andrew Mullins, executive director of the Missouri Medical Cannabis Trade Association.

How The New Bill Will Change Missouri Cannabis Tax Law

The bill would reverse 280E of the Missouri tax code, the clause that says cannabis businesses cannot claim these exemptions. Since the industry is still newly legal, as it was only developed in 2018, businesses have been feeling the crunch during tax season.

The current Missouri cannabis tax law as it is written specifically states that expenses incurred while running “any trade or business … that consists of trafficking controlled substances” are not valid to deduct to the federally illegal nature of cannabis. Unless cannabis is actually changed from being a Schedule I substance and legalized or decriminalized by the U.S. government, the IRS can use this provision to stop businesses from taking exemptions. 

“Can you imagine as a small business owner if you were not able to deduct common business expenses on your tax returns?” Senator Denny Hoskins said during a state Senate hearing. “If you couldn’t deduct these expenses, it would increase your taxes significantly.”

Now, if this passes and is signed into law by the governor, businesses will be able claim income tax deductions in the amount equal to expenditures, even if they work with cannabis products. 

“Some companies may even be subject to income taxes while operating at a loss,” said David Smith, certified public accountant based in St. Louis County. Smith makes it a point to keep his doors open to the cannabis industry and work with cannabis clients in a professional capacity. 

“Expenses might outweigh your income, especially as you’re starting out,” echoed Nicolas Rinella, chief executive officer of Hippos Cannabis in Missouri. He made the statement at a Senate hearing earlier this year on the topic, expressing that cannabis businesses are not making the money they normally would make in light of the recent pandemic, and need to be treated accordingly. 

According to Rinella, the amount of taxes that are currently levied against businesses in the cannabis industry  “limits the industry’s ability to serve patients, supply jobs and reinvest in the communities we serve. We’re not looking for special treatment; we just want to be treated like any other legal business.”

If this passes, legal, medical cannabis businesses in Missouri will have a much easier time with taxation and will be able to build the industry back up. If the governor is not on board, however, the industry will continue to struggle as these harsh taxes are levied.