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Medical Marijuana Dispensaries: Maintaining Business Records for Federal Income Tax Purposes, Not as Hard as it Sounds

Generally, medical marijuana dispensaries are not allowed to deduct expenses for federal income tax purposes because buying and selling marijuana, even for medical reasons, is considered “trafficking in illegal drugs.”  Such dispensaries, however, are allowed to offset income by cost of goods sold (“COGS”) if they maintain sufficiently reliable records to allow the IRS to verify their income and expenditures.  Although public opinion has shifted more in favor of medical marijuana in recent years, industry culture persists so that business transactions are still primarily in cash and not formally recorded.  As a result, the industry as a whole continues to struggle to maintain sufficient business records for federal income tax purposes.  Continue Reading