What is the primary federal tax issue for Oklahoma medical marijuana businesses?

The primary tax issue for Oklahoma medical marijuana businesses stems from the conflicting treatment of the marijuana industry under federal and state law. Although the approval of State Question 788 last summer legalized the use, growth and sale of medical marijuana for state purposes, marijuana remains an illegal drug under the federal Controlled Substances Act. Special tax provisions apply to penalize anything deemed illegal drug trafficking under federal law, including licensed medical marijuana businesses.

What are the specific federal tax burdens a medical marijuana business will face?

Internal Revenue Code Section 280E represents the biggest tax challenge for medical marijuana businesses. Generally, the Internal Revenue Code allows a taxpayer to take a deduction for all "ordinary and necessary" business expenses paid or incurred during the taxable year. Congress has created an exception to this rule in certain instances, however.