Business of Cannabis

Are medical patients victims of #vapegate?

A popular (and welcome) take on the vaping situation is coming out to support medical consumers as a type of victim of the circumstances. There is a level of scientific understanding that is a necessary, and still incomplete, part of the discussion. For example, some of the dominant methods of lab testing for cannabis (plate culturing) are based on food safety protocols that are generations old, incorporates a system of understanding that is not the only means of testing or understanding (genetic sequencing, for instance) and, while we have learned a great deal mastering the current testing, we may be missing important safety concerns.

Another critical area of growth at hand is the clinical understanding of the implications of mainstream cannabis consumption. We have some information, but there is always more yet to learn. In order for Cannabis Medicine to catch up with the accomplishments and accolades of modern Medicine, we must overcome generations (and engrained systems) of academic road-blockages. Still more stands in the way of a well-oiled, safe cannabis-consuming culture, and that is reproducibility of clean product and the assurance that a consume is obtaining (and consuming) clean, safe product. These are solved, perhaps with regulatory oversight and technology, either within the public or private sectors.

Forbes photo of medical cannabis as victims of vaping ban

For example, one of the elements of the current medical market that is still in need of close inspection and consideration is the potential contamination of vaporized products related to the construction materials of vapor technology itself. Devices are often made with metal solder which can contain and propel cadmium and/or other metals that are unhealthy for consumption. Similarly, heated plastics and other construction materials may be unsuitable as conduits for consumption by inhalation.

See https://www.cedfoundation.com/2019/09/05/vape-gate-2019-review-of-the-risks-of-vaping/ for a more complete review of some of these elements.

Nevertheless, it is wonderful to see public interest and discussion on this subject, which seems to touch on never common to many. Open-minded discussion, incorporating differing viewpoints will help us all grow to become a healthier and safer, cannabis-consuming culture.

https://www.forbes.com/sites/kevinmurphy/2019/11/14/medical-cannabis-patients-should-not-be-victims-of-vaping-bans/#30f70a783a6f

Benjamin Caplan, MDAre medical patients victims of #vapegate?
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US Tax Court denies deduction request under §280E, but leaves the door open for future challenges

By Shuki Greer, Esq.

Last week, the Tax Court continued the line of cases denying tax deductions under Internal Revenue Code §280E. That section says that any business which is “trafficking in controlled substances” cannot receive many of the traditional deductions that a business may take. Otherwise put, this means that a company must pay taxes on all of its incoming revenue before it subtracts most of its expenses.

This law can be a severe punishment for a cannabis company that may be operating entirely legally under state law. Unfortunately, the federal government still considers them to be “drug-dealers” and holds this punitive tax measure over their heads.

The case before the tax court involved a dispensary that filed taxes and took deductions for its business expenses. The IRS sent them a bill of $1.26 million, plus another 250K in fines. The company filed suit, asking the court to declare that it did not have to pay those bills.

A divided court rejected the company’s three arguments. In addition to the majority opinion, there were two concurring opinions and two dissenting opinions. Of particular interest is the Gustafson dissent, which opens up a new avenue for declaring §280E to be a Constitutional violation. Essentially, Gustafson argues, that the 16th Amendment allows Congress to tax income. Income is defined as “gain”, or net profits, minus costs, to get those profits. So for Congress to then disallow normal business expenses, it means that they are taxing more than actual income, which violates the 16th Amendment.

This argument was only agreed to by one other Judge on the tax court, which ultimately ruled against the dispensary. However, in the future, as the public opinion shifts, the policies behind these prohibitive rules may fall away, and we may not be far away from a court coming to the opposite conclusion. Legal Cannabis companies are working tirelessly to follow the law, and they should be rewarded for doing so. Continuing the regime of these prohibitive financial policies constitutes a “subsidy for the black market.” The way to solve this problem is to shift the financial incentives in favor of operating under a legal framework, and avoiding this severe tax problem is the best way forward.

tax codes picture with calculator and tax document

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Benjamin Caplan, MDUS Tax Court denies deduction request under §280E, but leaves the door open for future challenges
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Arizona Beverage Co embracing cannabis too

Arizona Beverage Co. has reached a deal with a cannabis company, Dixie Brands. If approved by Dixie’s board, Dixie would manufacture an Arizona line of cannabis products, starting with vape pens and edible gummies and later expanding to beverages. Learn more here: https://www.wsj.com/articles/arizona-iced-tea-maker-turns-to-weed-11565172124

Benjamin Caplan, MDArizona Beverage Co embracing cannabis too
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