Businesses selling marijuana will be able to deduct business expenses from their state taxes for the first time this year, a spokeswoman for the Missouri Internal Revenue Service confirmed to The Independent.
Missourians voted to legalize medical marijuana in 2018. But under federal law, growing, transporting or selling marijuana is still a crime.
Because of this dynamic, marijuana businesses were different from all other legal businesses in the state because they were not allowed to deduct ordinary and necessary business expenses, such as marketing or furniture expenses, on either their state or federal tax returns.
Sen. Denny Hoskins, R-Warrensburg, submitted the bill in advance December to change that, at least at the state level. And the Republicans have been trying to make a change for the last three years.
However, Hoskins told The Independent Friday that passage of Amendment 3, the constitutional amendment legalizing marijuana that voters approved in November, would allow the deductions.
“After further discussions with the (Department of Revenue), they believe the passage of Amendment 3 has cleared up the issue and normal business deductions will be allowed for marijuana-related businesses, so no further legislation is necessary,” Hoskins said via text message.
In 2021, state lawmakers approved Hoskins’ bill as an amendment to the broad bill. But Governor Mike Parson vetoed the law over an unrelated provision — a section lawmakers included that would have provided tax benefits for businesses affected by public health restrictions at the city or county level.
In his letter vetoing the measure, Parson did not mention the medical marijuana provisions.
Last year, a bill that included directive left the Senate, but stalled in the House.
Adolphus Pruitt, president of St. Louis City NAACP chapter, said the change will especially benefit small businesses in the marijuana industry during their first years of business.
“In those early years, companies have to do their best to break even or try to get a return on their investment and be profitable,” Pruitt said. “That’s why it’s important for those who are able to deduct those business expenses to increase their earnings – just like any other business.”
Hoskins, who is an accountant, told lawmakers last year that businesses that sell marijuana pay a higher overall tax rate on the income they earn. In 2021, the effective tax rate for corporations was about 20 percent, he said.
“You could actually have an effective tax rate of over 70%, and you can’t deduct those expenses,” Hoskins said during a Senate committee hearing last spring, “because you’re taxed on gross profit, not ordinary business income like other businesses. “
In December, Missourians bought $40.25 million worth of medical marijuana, shattering the previous monthly sales record. In total, Missouri has now sold $605.31 million worth of medical marijuana since sales began in October 2020. In 2022 alone, Missouri sold more than $390 million.