But in recent years the IRS has used section 280E to go after state-legal marijuana businesses, since they technically deal in a schedule 1 substance, the federal government’s strictest classification for an illegal drug. The move has netted the US millions in extra revenue from pot shops and growers, but it’s also forced some state-legal marijuana businesses to shut down.
DeAngelo of Harborside Health Center worries that section 280E could actually help illicit drug traffickers. To cope with the tax burden of 280E, many marijuana businesses raise their prices. But raising prices could make legally sold pot more expensive than illegally sold pot, giving consumers more incentive to buy from illicit drug dealers.
Well Vox, do you think that high taxes burden businesses?