Luigi Zamarra, CPA is the Chief Financial Officer of Harborside Health Center, recognized as one of the largest medical cannabis dispensaries in the United States.  Mr. Zamarra has written an interesting article entitled “Medical Cannabis Dispensaries: Minimizing the Cost of IRC Section 280E” that is a must read for all prospective owners of Arizona medical marijuana dispensaries.  The article explains how a medical marijuana business that is legal under state law can allocate its expenses between deductible and nondeductible expenses so as to comply with the Californians Helping to Alleviate Medical Problems, Inc. v. Commissioner of Internal Revenue Tax Court case and also deduct a substantial portion of its “nontrafficking” expenses.  Mr. Zamarra says:

“Making a 280E calculation is a three-step process. First, allocate all occupancy costs between Retail (this term is used herein to denote those operations, a portion of which would ordinarily be considered “trafficking” as this term is used in Section 280E) and Non-Retail operations. Second, make the same allocation for all payroll-related costs. Third, apply the ‘Transactional Factor’.”

Circular 230 Notice:  Pursuant to U.S. Treasury Department regulations, I am required to advise you that, unless otherwise expressly indicated, any federal tax advice contained in this communication, including  links, is not intended or written to be used, and  may not be used, for the purpose of  (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.