Your numbers (annual, USD)
If operating expenses were different
| Operating expenses | Real profit | Total tax | Cash after tax |
|---|
Questions
What does Section 280E do?
Internal Revenue Code section 280E disallows deductions and credits for a trade or business that consists of trafficking in Schedule I or II controlled substances. Cost of goods sold is not a deduction, it reduces gross receipts, so it still counts; rent, payroll for non-production staff, marketing and most other operating expenses do not. The result is tax on gross profit rather than on real profit.
Is cannabis still subject to 280E?
Only while the business trafficks in a substance listed on Schedule I or II. Federal rescheduling has been in motion, and the rule that applies to your tax year is the one in force then. The tool has a switch to turn 280E off so you can compare, and you should confirm current scheduling status with a tax professional before relying on either answer.
Why can I owe tax while losing money?
Because operating expenses are not deductible under 280E, taxable income is gross profit minus nothing. A business with a positive gross profit and a real loss still has a positive taxable base. The tool flags that case.
What can legitimately be counted as cost of goods sold?
It depends on whether you resell purchased product or produce it, and on the cost rules that apply (for example sections 471 and 263A). Freight-in on purchased inventory is a common example for resellers. The reclassification box lets you test what a given amount would be worth; it does not decide what qualifies, and a tax professional must.
Is my financial data uploaded anywhere?
No. All arithmetic runs in this page and the page makes no network calls.