cannabis taxes accounting

U.S. Cannabis Industry May Save Over $2 Billion A Year On Taxes Under Schedule III

The federal government of the United States recently announced that a plan to reschedule cannabis from Schedule I to Schedule III is moving forward. While the policy change will yield various potential ramifications, a generally accepted effect of rescheduling is the end of state-legal cannabis businesses being subjected to 280E tax provisions.

The 280E provision of the U.S. tax code prevents state-legal cannabis businesses from writing off what are considered to be standard business expenses in many other industries due to the cannabis plant’s Schedule I status. 280E does not apply to Schedule III substances.

When the federal classification status changes it will help the emerging legal cannabis industry in the United States save a significant amount of money. According to a May 2023 analysis by Whitney Economics, “cannabis operators paid over $1.8 billion in additional taxes when compared to ordinary businesses”  in 2022, and a that figure was projected to be “$2.1 billion in 2023.”

“The tax burden is so heavy that only 24.4% of cannabis operators surveyed indicated that they are profitable. This is down from 42% the year prior. The effective tax rates often exceed 70% for cannabis retailers.” Whitney Economic stated at the time in a press release.

Total legal cannabis sales in the United States are expected to reach $31.4 billion in 2024 according to a recent analysis by Whitney Economics. Additionally, leading cannabis jobs platform Vangst, in conjunction with Whitney Economics, estimates that the legal cannabis industry now supports 440,445 full time-equivalent cannabis jobs in the United States.

Whitney Economics also projects the following legal cannabis sales figures in the United States for the coming years:

  • 2024: $31.4 billion (9.1% growth from 2023)
  • 2025: $35.2 billion (12.1% growth from 2024)
  • 2030: $67.2 billion
  • 2035: $87.0 billion

The emerging legal cannabis industry in the United States is projected to add roughly $112 billion to the nation’s economy in 2024 according to a newly released analysis by MJBiz Daily. The projection is part of the company’s 2024 MJBiz Factbook.

“The total U.S. economic impact generated by regulated marijuana sales could top $112.4 billion in 2024, about 12% more than last year,” MJBiz stated in its initial reporting.