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Sec/280 Week 9 Final Paper

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1. Would income from the business be taxable under the Internal Revenue Code if Ohio authorizes cannabis sales but federal law still criminalizes it?
The income from the cannabis sales is taxable under the Internal Revenue Code. If Ohio State authorizes the business, according to the general business taxation, there is a flat 15 percent rate on gross revenue of cannabis producers and a special tax rate up to 5 percent on gross revenue of cannabis retailers. The tax revenue is going to split up in three groups, a municipal and township government fund, a strong county fund, and the marijuana control commission fund. According to the Sec. 61(a), the federal government can collect taxes from cannabis business. Because “gross sales” does not “differentiate between income derived from legal sources and income derived from illegal.” The IRS requires taxpayers have to report all income, regardless of whether it is obtained legally or illegally.

2. Are there any limitations or restrictions under the Internal Revenue Code relating to deducting business expenses like rent, advertising, supplies, salaries, or cost of goods sold? …show more content…

Sec. 280E excludes marijuana businesses and disallows businesses "trafficking in controlled substances" from deducting their regular business expenses. Sec. 280E punish traffickers of controlled substances by denying deductions from gross income for business expenses. As the results, the business expenses related to rent, marketing, distribution of products or salaries cannot be deducted. However, Congress does allow taxpayers in cannabis business to deduct otherwise allowable expenses related to engage in other activities that do not involve the sale of

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