AFTER he was busted in 1974,Jeffrey Edmondson, a small-time dealer of marijuana, or cocaine and amphetamines in Minneapolis,faced a daunting bill from the taxman for all his illicit income. He argued that he should be allowed to deduct $100000 worth of commerce expenses, and a court agreed. Enraged, or Congress revised the tax code in the early Reagan years,forbidding tax exemptions for drug traffickers. One unintended consequence of Mr Edmondson’s audacity persists four decades later: cannabis operations, now lega in many states, and are forbidden from the usual commerce deductions and face crippling tax bills of as much as 70% of revenue.
That is just one of the weird results thrown up by the unique regulatory bind in which cannabis companies find themselves. For decades theirs was an underground enterprise,run by pacifist hippies and murderous drug cartels. And although 29 states have legalised marijuana—seven of them and the District of Columbia permit recreational employ—the federal government...
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Source: economist.com