April 2, 2019

The Business of Cannabis: How Hopeful Missouri Cultivators, Manufacturers and Dispensaries Can Prepare for Amendment 2

As a result of the 2018 midterm elections, Missouri became the 31st state to legalize medical marijuana. The passage of Amendment 2 legalizes the growing, manufacturing, selling and consuming of marijuana and marijuana products for medicinal use at the state level. While this is a huge opportunity for those interested in joining the cannabis industry, there are a number of regulatory hoops to jump through before cannabis cultivators, manufacturers and dispensaries can start doing business.

Medical Marijuana Application and Licensing Process

The Missouri Department of Health & Senior Services (DHSS) is tasked with implementing the provisions of Amendment 2, including the issuance of registrations, licenses and certifications. Below is a timeline of important dates to remember if you are considering applying.


  • Jan. 5, 2019 – Pre-filed application fee forms will begin to be accepted.
  • June 4, 2019 – Application forms and instructions will be available.
  • July 4, 2019 – Applications for identification cards will begin to be accepted.
  • Aug. 3, 2019 – Facility applications will begin to be accepted.
  • Dec. 31, 2019 – Deadline for approval of facility applications submitted on Aug 3.


The application fee is determined by the type of facility and is non-refundable, even if the application is denied.

  • Cultivation facilities require a $10,000 non-refundable application fee and a $25,000 annual fee.
  • Medical marijuana-infused manufacturing facilities require a $6,000 non-refundable application fee and a $10,000 annual fee.
  • Dispensary facilities require a $6,000 non-refundable application fee and a $10,000 annual fee.

Application Approval

According to Amendment 2, there will be a limited number of applications approved per facility type. The DHSS will approve a minimum of at least 62 cultivation facilities, 88 medical marijuana-infused manufacturing facilities and 192 dispensary facilities.

Beginning January 5, 2019, the DHSS began accepting Pre-Filed Application Fee forms. The DHSS has indicated that pre-filing fees will not result in preferential treatment or affect the order in which facility application forms are reviewed. Despite the fact that applicants will not receive preferential treatment for pre-filing fees, many applicants have chosen to submit a Pre-Filed Application Fee form and pay the applicable application fee.  As of March 11, 2019, nearly 500 Pre-Filed Application Fee forms have been submitted and fees totaling over $3.3 million have been received by the DHSS.

Learn more about the Anders Cannabis Group, or contact an Anders advisor to see how we can help your business navigate the new laws and regulations.

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April 2, 2019

How Section 280E Creates Big Tax Challenges for the Cannabis Industry

It is no secret that cannabis businesses must deal with substantially more rules and regulations as compared to most other businesses. Internal Revenue Code Section 280E is one of the biggest complications for businesses operating within the cannabis industry, causing an increased tax burden for cultivation facilities, medical marijuana manufacturers and dispensaries. Educating yourself on what expenses are deductible under IRC Section 280E, and which are not deductible, will help your cannabis business make better financial decisions.

What is Section 280E?

The IRS deems state-compliant cannabis businesses as being federally illegal, and requires this to be reflected on the federal tax return. Section 280E of the tax code states that businesses that traffic in controlled substances cannot deduct any expenses incurred in carrying on the production, distribution and sale of controlled substances. This means that businesses operating within the cannabis industry cannot deduct certain expenses, many of which are deductible for businesses operating within a legal industry.

One exception to this law is for costs of goods sold (COGS). COGS are deductible, and only account for expenses associated with producing the product. Deductible expenses include such items as seeds, soil, water, nutrients and expenses related to the cultivation and harvesting of the plant. Expenses that are part of the distribution process are not deductible, and include such items as rent, shipping, overhead and employee expenditures.

Because of Section 280E, most costs associated with doing business in the cannabis industry are not deductible, resulting in cannabis businesses paying taxes on gross profit instead of net income. This is a big concern as it can quickly make a business unprofitable.

280E Example

The example below outlines the impact of Section 280E for a corporation:

Revenue                                                                                             $2,000,000

Less: Cost of Goods Sold                                                                   –  600,000

Gross Profit                                                                                          1,400,000

Less: Other Selling, General & Administrative Expenses            –  1,100,000

Net Income                                                                                        $   300,000

Federal Income Tax Rate = 21%

Non-Cannabis Business

  • Net income of $300,000 taxed at 21% = $63,000
  • Results in net income after taxes of $237,000 and an effective tax rate of 21%

Cannabis Business

  • Gross profit of $1,400,000 taxed at 21% = $294,000
  • Results in net income after taxes of $6,000 and an effective tax rate of 98%

Thus, as a result of 280E, the state legal cannabis company ends up paying an additional $231,000 in taxes.

What Can I Do About Section 280E?

The best defense against Section 280E and other tax implications of the cannabis industry is to work with an experienced team of accountants and advisors. Anders has a team of CPAs and advisors well-versed in the industry who can help ensure your financial information is up to par with evolving regulations and your tax burden is minimized. Learn more about the Anders Cannabis Group or contact an Anders advisor to find out how we can help you keep more money in your business.

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