Although the IRS has insisted that it isn’t a sign of imminent legalization, cannabis and crypto enthusiasts cannot help but remain optimistic.
Whenever the Internal Revenue Service (IRS) hosts an event in any business sector, it is usually a sign that the industry holds excellent potential for high revenues.
The cryptocurrency industry is currently worth $2.48 trillion, which is a leap from the $1 trillion value at the start of the year. The marijuana industry is $118.9 billion, which is a groundbreaking increase from $20.6 billion in 2019.
Despite the federal government’s reluctance to legalize and adopt both sectors, the revenue they generate which boosts the country’s economy cannot be ignored. Therefore when the IRS hosted the tax event for both sectors, crypto and cannabis enthusiasts wondered if it was a move towards legalization or federal support. The tax event Last Wednesday, the IRS held a forum organized to discuss tax policies for cannabis and cryptocurrency businesses. The meeting was led by a representative of the National Association of Tax Professionals (NATP) and highlighted some issues relating to both companies.
Some of the issues discussed included permitting tax deductions as marijuana remains illegal at the federal level. Also, the issue of how different states tax cannabis and paying taxes on profit made from cryptocurrencies. During a discussion session at the event, there were discussions on the increasing support for marijuana legalization and the possibility for federal reform.
The publicity material for the forum stated that attendees would discover ways to prepare a tax return for “illegal” activities and understand when digital currencies should be declared as taxable income.
Tax professionals who sought to understand the crypto and marijuana markets were also part of the attendees. The event offered a higher-level overview of some of the unique financial challenges to both markets. What do crypto and marijuana have in common? Cryptocurrencies and marijuana have one challenge in common: federal prohibition. Until the federal government decides to legalize them, such forums will always be organized to explain how illegality works with taxes.
A more significant number of states in America still haven’t legalized marijuana in some forms. The illicit status under the Controlled Substances Act implies that cannabis businesses can deduct the standard costs like other regulated markets. The presenter at the event confirmed this to be true because it is in Provision 280E of the tax laws.
The presenter also emphasized that even if a company is labeled “illegal,” marijuana businesses are still required to pay federal taxes. He maintained that there are opportunities for few deductions when revealing the cost of goods for producers and retailers.
A slide from the IRS presentation showed a poll by Americans who are against marijuana prohibition. The presentation also offered an overview of the economic possibility of the cannabis market, which is of much interest to the IRS.