Marijuana dispensaries hit with old tax law

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Marijuana dispensaries hit with old tax law

CREATED Feb 27, 2013

Reporter: Liz Kotalik

TUCSON (KGUN9-TV) - Aari Ruben is getting ready to open up shop in East Tucson.

"I saw a need for alternative therapies to be offered to people with debilitating conditions," Aari said.

Although this is his passion, the process of opening a medical marijuana dispensary hasn't been easy.

"There's a great deal of regulatory structure that has to be complied with, and that's in addition to all of the normal challenges of opening a small business."
And it won't get much easier.
Section 280E of the IRS tax code says that any activities involved in running a business that sells illegal drugs cannot be deducted or credited.
This means even in states where medical marijuana is legal, because the drug is illegal on a federal level, dispensaries take a hit.
"It means we can't write off expenses such as rent and wages and other things associated with the direct sale of the medical cannabis to our patients."
Aari says that means about a 20% price raise in marijuana.
Also, lower employee wages and a downsize of general take-home income.

But, all of this is nothing new.
Aari says because the extra charges affect such a small portion of the population, few people know about them.
But dispensary owners do, and they're not backing down.
"I think they see it as part of the political and social structure that needs to change in regard to medical marijuana," Aari says.

And, extra expenses or not, in two months, another dispensary's doors will open in Tucson.