Rescheduling Marijuana Means Major Financial Boom for Cannabis Retailers
09/08/2023
The potential reclassification of marijuana under federal law could lead to a substantial financial windfall for the burgeoning cannabis industry. Currently, cannabis is classified as a Schedule I drug, placing it alongside substances such as heroin and LSD — drugs deemed to have a high potential for abuse and no medical use. For reference, OxyContin is, to this day, a Schedule II substance and is considered safer than marijuana under federal law.
The proposed reevaluation, spearheaded by the Department of Health and Human Services and pending consideration by the Drug Enforcement Administration, would see marijuana downshifted to Schedule III. This change would equate cannabis with milder substances, such as Tylenol with Codeine, as well as highly addictive substances like OxyContin.
This reclassification would not alter marijuana's status as illegal under federal law. However, it carries significant financial implications for the cannabis industry. The shift would exempt marijuana businesses from an IRS rule prohibiting tax write-offs for businesses that "traffic" controlled substances. As a result, marijuana retailers could experience substantial savings on their federal tax bill. Economist Beau Whitney, an expert in the cannabis industry, estimates these savings could be as much as $2 billion a year or more.
This financial boon, however, does not fully resolve the conflicts between federal and state law. While the federal government still bans the drug, numerous states have passed laws accepting its use. The National Cannabis Industry Association asserts that the only comprehensive solution is removing cannabis from the Controlled Substances Act completely.
While the proposal marks a significant step forward, it falls short of introducing standardized production protocols, universal labeling, or childproof packaging. The cannabis industry still has a long path towards full acceptance and regulation. Nevertheless, the potential tax relief is a significant milestone in the industry's evolution and a testament to the ongoing shift in public sentiment and policy toward marijuana use.
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The proposed reevaluation, spearheaded by the Department of Health and Human Services and pending consideration by the Drug Enforcement Administration, would see marijuana downshifted to Schedule III. This change would equate cannabis with milder substances, such as Tylenol with Codeine, as well as highly addictive substances like OxyContin.
This reclassification would not alter marijuana's status as illegal under federal law. However, it carries significant financial implications for the cannabis industry. The shift would exempt marijuana businesses from an IRS rule prohibiting tax write-offs for businesses that "traffic" controlled substances. As a result, marijuana retailers could experience substantial savings on their federal tax bill. Economist Beau Whitney, an expert in the cannabis industry, estimates these savings could be as much as $2 billion a year or more.
This financial boon, however, does not fully resolve the conflicts between federal and state law. While the federal government still bans the drug, numerous states have passed laws accepting its use. The National Cannabis Industry Association asserts that the only comprehensive solution is removing cannabis from the Controlled Substances Act completely.
While the proposal marks a significant step forward, it falls short of introducing standardized production protocols, universal labeling, or childproof packaging. The cannabis industry still has a long path towards full acceptance and regulation. Nevertheless, the potential tax relief is a significant milestone in the industry's evolution and a testament to the ongoing shift in public sentiment and policy toward marijuana use.
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