502 Excise Taxes DO NOT Have To Be Counted As Income When 502 Cannabis Businesses File Their Federal Income Taxes
“Don’t count excise tax amount as income” Dean Guske, CPA to many marijuana businesses in Washington State (and around the country), and his firm, Guske & Company, have been taking the position with their clients since the beginning of the year that the 502 excise taxes DO NOT have to be counted as income when 502 Cannabis businesses file their federal income taxes. Instead, the excise tax is a reduction from the net income.
This is in direct contradiction to what most people in the industry have thought was the position of the IRS – that the full amount taken in from sales would be counted as income before the excise taxes were paid to the Washington State Department of Revenue, and therefore would double tax the businesses by having to pay tax on income they didn’t get to keep.
But a new memo issued by the IRS today confirms Guske’s position, concluding that: “A taxpayer who paid the State of Washington marijuana excise tax should treat the expenditure as a reduction in the amount realized on the sale of the property.”
You can read the full memo here.
Great news for 502 businesses! If you already filed your federal income taxes and counted the amount you paid the DOR excise taxes as income, you should take to your CPA, or better yet, Guske & Company, about how to amend your taxes and get that money back!