Marijuana businesses are going to catch a break on state income taxes starting next year thanks to a bill allowing owners to deduct business expenses for the first time.
Governor John Hickenlooper signed HB 13-1042 into law earlier this week, legitimizing one of the least controversial measures among the dozen or so debated during the recently concluded legislative session.
According to state Senator Lucia Guzman, who co-sponsored the bill, the inability to deduct marijuana-related business expenses has been an oversight in Colorado since dispensaries started popping up in 2008.
"We were just trying to catch up with the sale of marijuana and establishing businesses with the sale of medical marijuana," Guzman says. "Once that happened, we needed to catch up and make sure they were doing things the same way other businesses do."
In Guzman's opinion, these changes are a step in the right direction. Under federal law, dispensaries aren't allowed to take deductions allowed to other legal businesses since marijuana is considered an illegal substance federally. And because Colorado tax returns are based on the federal ones, business owners were previously unable to withhold anything at the state level, either.
"I think it's just good business," Guzman says. "It doesn't change things federally, but it gives them the opportunity to operate like any other business in the state."
Being able to financially operate like a normal business is something that the industry has been working toward since its creation.
"These are legitimate businesses licensed by state of Colorado that pay licensing fees and other things, but aren't allowed to take other business deductions that other businesses can," notes Meg Collins, executive director for the Cannabis Business. "We're waiting to see how the regulations will be crafted and adopted. But by and large, we are pretty happy,"
The price of goods sold is the major deduction store owners will be allowed to make.
"Any money that we can save and hold on to and reinvest back in our companies and be able to do something with is going to be good at the end of the day," says Verde Wellness owner Chuck Blackton. "An exact number [of savings] is irrelevant. It's just good to see progress."
Given that the law is still fresh, it's impossible to know how much each business will save. But Guzman predicts it could be as much as $600,000 for the industry statewide.
"I think there are 120-140 medical marijuana establishments in the state of Colorado that will benefit," Guzman says.
If you like this story, consider signing up for our email newsletters.
SHOW ME HOW
This means the state will lose tax revenue, but she doesn't see it as a big concern.
Still, other issues remain for marijuana businesses.
"The next biggest issue to be dealt with is the banking issue," says Blackton, referring to rules that prevent marijuana businesses from being able to open bank accounts and take out loans -- due again to cannabis' illegality in the eyes of the feds, who regulate the country's financial system. "We are real business people, and it's time for us to be treated like it."