Normal Taxes for Marijuana Growers? Think Again

The debate on whether marijuana cultivation should be considered a commercial activity or an agricultural undertaking rages on. But why should you care? Because the answer will significantly impact the federal taxes of anyone who grows and sells marijuana.

Washington and Colorado have already decided how to tax marijuana at the retail level, but both are still trying to figure out how to tax marijuana production. The AP tells us that some lawmakers in both states say marijuana growers should not be eligible for the tax breaks given to farmers who grow “conventional” crops. Other lawmakers say that marijuana, while it is growing, should be treated just like hops and barley that go on to become highly taxed alcohol.

The debate on whether marijuana cultivation should be considered a commercial activity or an agricultural undertaking rages on. But why should you care? Because the answer will significantly impact the federal taxes of anyone who grows and sells marijuana.

Washington and Colorado have already decided how to tax marijuana at the retail level, but both are still trying to figure out how to tax marijuana production. The AP tells us that some lawmakers in both states say marijuana growers should not be eligible for the tax breaks given to farmers who grow “conventional” crops. Other lawmakers say that marijuana, while it is growing, should be treated just like hops and barley that go on to become highly taxed alcohol.

In Washington State, lawmakers are considering a bill to prohibit marijuana growers from qualifying for agriculture tax breaks for ten years, so as to allow the State time to collect information and then make a decision on taxation after-the-fact. In Colorado, where marijuana cultivation is currently treated as a commercial activity, a vote on whether marijuana greenhouses should be considered agricultural or commercial property was postponed last week. The bill was stymied when its sponsor added a last-minute amendment to ban pot growers from getting the cultivator tax break Colorado grants to conventional greenhouses and nurseries.

Many who advocate treating marijuana crop the same way as traditional crops for tax purposes view the alcohol industry as an equivalent industry and want an equivalent tax scheme. Alcohol is highly taxed, but the hops and barley farmers grow for alcohol qualify for agriculture tax rates. Why should marijuana cultivation be treated any differently? If the states want these recreational and/or medical marijuana programs to survive, they should provide tax relief somewhere in the supply chain. No need to grant anyone special tax rates, just the rates they logically deserve.

If you believe as we do, we urge you to contact your state legislatures.