A top official with the Internal Revenue Service (IRS) is taking steps to help marijuana businesses stay compliant with their taxes under the umbrella of ongoing federal prohibition, and in a recent interview recognized that the legalization movement will potentially succeed in ending prohibition in “all states.”
In an informational webinar hosted by the PBC Conference, IRS Commissioner of the Small Business/Self Employed Division Eric Hylton gave candid insights on a variety of cannabis industry issues from the federal perspective. The overarching theme to his comments was that states are already legalizing marijuana regardless of federal policy, and that’s creating complications that need to be addressed.
“The challenge really there is, it’s still considered a Schedule I controlled substance under federal law,” he said. “However, when I’m talking with my employees and talking with them in our examination, we recognize that this is moving in a direction where potentially all states will have it legalized.”
In spite of the federal-state policy conflict, IRS wants cannabis business owners “to be educated” because there are tax obligations regardless of whether the federal government considers their source of income to be illegal.
To that end, IRS released updated tax compliance guidance for marijuana firms in September, and the new webinar appearance by Hylton is part of an ongoing education effort by the agency.
“There are thousands of people who are trying to jump into the marijuana business right now,” the IRS official said. “And as you become legalized throughout the country, we wanted to educate individuals.”
Hylton also acknowledged “the challenge the marijuana industry has in not having sometimes non-traditional banking relationships,” referencing the fact that, under federal prohibition, many cannabis businesses operate on a cash-only basis because financial institutions are reluctant to take on the risk of servicing a