They write………..It’s tax time for everyone, but for entrepreneurs in the rapidly growing cannabis business, it’s a particular challenge. That’s because they are confronted with the issue of filing taxes for a federally illegal market, even though it’s perfectly legal in the state in which they do business.

Section 280E of the Internal Revenue Code prohibits the deduction of otherwise ordinary business expenses from gross income associated with the trafficking of Schedule I or Schedule II substances as defined by the Controlled Substances Act.

Specifically, the statute states: “No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of Schedules I and II of the Controlled Substances Act) which is prohibited by federal law or the law of any state in which such trade or business is conducted.”

Full article at ….  https://www.accountingtoday.com/news/cannabis-businesses-have-special-tax-issues