Why it matters: New Jersey has signed legislation to allow standard business tax deductions for licensed cannabis companies in a move expected to improve the viability of the state’s regulated cannabis industry. This decouples New Jersey’s tax laws from the US federal tax code’s Section 280E and will allow cannabis firms to claim certain business expenses on their state tax filings from next year.
What they are saying: The bill sponsors believe the new legislation helps promote diversity and equal opportunities within the state’s cannabis industry and that the new legislation would lead to a more economically viable environment for New Jersey’s young industry.
The big picture: By making business tax deductions available to legal cannabis companies, New Jersey joins other US states, including Hawaii, Colorado, California, Michigan, New York, and Oregon, in passing legislation separating state tax law from Section 280E. This move will improve the profitability of the cannabis industry across the US.
What to watch: More states are expected to follow New Jersey’s example amid calls for businesses in the sector to receive fair taxation and a level playing field.
My take: Cannabis decriminalization is making impressive strides towards legalization in the US. New Jersey’s decision to make business tax deductions available demonstrates the potential growth roadmap that cannabis companies need to progress in an increasingly crowded field. However, with the federal tax framework still denying most standard business tax deductions for cannabis companies, more negotiations in the sector’s future are likely if this bill’s objective is to make meaningful changes.
