Effective Tax Rate On Cannabis Companies ‘Can Be Fatal’; Proposed Bill In CT Would Offer Relief
The state’s dispensaries took in $2 million in just the first eight days
After waiting years for the sale of recreational cannabis to become legal in Connecticut and crossing a plethora of regulatory hurdles, companies that sell the product face another challenge: taxes.
The state’s adult-use industry launched Jan. 10, with eight dispensaries now approved to sell marijuana to customers 21 and older. Two more dispensaries, in Torrington and Danbury, plan to debut soon.
Since opening to the general public, dispensaries have seen robust sales, recording $2 million in revenues in just the first eight days. But while adult-use sales open up a lucrative new market, a large proportion of companies’ revenues will go to the government.
Cannabis retailers’ effective tax rate can be as high as 80%, said Sarah Westby, co-chair of Hartford-based law firm Shipman & Goodwin’s cannabis industry practice. That’s largely because marijuana companies are unable to deduct their business expenses — such as rent and employee salaries — from their state and federal taxes due to cannabis still being illegal at the federal level.
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