Colorado Cannabis & Hemp Industries 

IRC § 280E Analysis / R&D Tax Credit Eligibility
  • Does Section 280E Apply to state individual income tax?

    • No. Colorado specifically allows individuals to subtract expenses disallowed by Section 280E to determine Colorado taxable income. See Colo. Rev. Stat. Sec. 39-22-104(4).

  • Does Section 280E apply to state corporate income tax?

    • No. Colorado specifically allows corporations to subtract expenses disallowed by Section 280E to determine Colorado taxable income. See Colo. Rev. Stat. § 39-22-304(3)(m), (n). 

  • Are State R&D Tax Credits Potentially Eligible for "Plant Touching" (e.g. producers, cultivators, manufacturers, retailers) Cannabis Companies?

    • Yes​, subject to further 280E analysis regarding company activities, structure, and applicable state laws. Note, the Colorado Office of Economic Development & International Trade (EZ Tax Credits) has cautioned "C.R.S. 39-30-103 (8) states that … only a taxpayer that is engaged in a business that is legal under both state and federal law is eligible to claim a credit…. Though an EZ Administrator may approve a pre-certification and/or certification for EZ tax credits, the onus is on the taxpayer to comply with the statutes."

  • Are State R&D Tax Credits Potentially Eligible for Industrial Hemp Companies & "Non-Plant Touching" Separate Trade or Businesses (e.g. testing laboratories)?

    • Yes​, subject to further 280E analysis regarding company activities, structure, and applicable state laws.

  • See Colorado R&D Credit Summary​

State Law Background

(1) Hemp State Law Authority & Background

  • Colo. Rev. Stat. § 35-61-101 to 35-61-109 (2016)

    • Allows hemp cultivation for commercial and research purposes to be overseen by the Industrial Hemp Committee under the Department of Agriculture.

    • Establishes a seed certification program.

    • Establishes a grant program for state institutions of higher education to research new hemp seed varieties. 

 

(2) Medical Marijuana State Law Authority & Background

  • Statutory Language (year) - Amendment 20 (2000)

    • Patient Registry or ID cards - Yes

    • Allows Dispensaries - Yes

    • Specifies Conditions - Yes

    • Recognizes Patients from other states - No

    • State Allows for Retail Sales/Adult Use - Amendment 64 (2012) Task Force Implementation Recommendations (2013) Analysis of CO Amendment 64 (2013) Colorado Marijuana Sales and Tax Reports 2014 "Edibles" regulation measure FAQ about CO cannabis laws by the Denver Post

  • Are sales of medical marijuana subject to sales tax?

    • Subject to exceptions, yes. Medical marijuana is generally subject to the general 2.9% state sales tax and applicable local and special district taxes. A sale of medical marijuana is exempt from sales tax if the purchaser's medical marijuana registry identification card indicates the tax-exempt status of the purchaser.

    • For reference: Colorado FYI Sales 93.

  • Is medical marijuana subject to an excise tax?

    • Yes. Effective July 1, 2017, a cultivation facility, dispensary or other marijuana business is required to collect and remit an Arkansas medical marijuana special privilege tax of 4% from the gross receipts or gross proceeds derived from each sale of usable marijuana. See Ark. Code Sec. 26-57-1504(a). The Medical Marijuana Special Privilege Tax is imposed in addition to regular sales tax.

(3) Recreational Marijuana State Law Authority & Background​

  • Ballot Measure: Amendment 64 (55%) — Approved Nov. 6, 2012 by 55% of voters

  • Law: Colorado Constitution: Article 18, section 16

    • State Website: Colorado Marijuana

    • Effective: Dec. 10, 2012 (revised penalties) Jan. 1, 2014 (commercial sales)

    • Colorado Medical Marijuana Laws: Medical cannabis patients are not subject to the limits of the recreational law and may possess up to 2 oz usable marijuana, and 6 plants (3 mature and 3 immature).

    • Possession and Cultivation Limits: Age: 21+

    • Usable Marijuana: up to 1 oz

    • Plants: up to 6 plants with no more than 3 mature plants

    • Hash & Concentrates: up to 1 oz

  • Are sales of recreational marijuana subject to sales tax?

    • Yes, at a special rate. Sales of retail marijuana are exempt from general state sales tax of 2.9%. However, there is a 15% retail marijuana sales tax on all sales of retail marijuana and retail marijuana-infused products in the state charged on the final consumer purchase price (15% beginning July 1, 2017; 10% between Jan. 1, 2014 - June 30, 2017). See CRS Sec. 39-28.8-201.

    • For reference: Colorado FYI Sales 93

  • Is recreational marijuana subject to an excise tax?

    • Yes. Colorado levies a 15% retail marijuana excise tax on the first sale or transfer of unprocessed retail marijuana by a retail marijuana cultivation facility to either a retail marijuana store or a facility that manufactures marijuana products. The base depends upon whether the cultivation facility is affiliated with the retail marijuana store or manufacturing facility. See CRS 39-28.8-301.

    • For reference: Colorado FYI Excise 23

(4) Does the State impose a Stamp Tax or Controlled Substances Tax?

  • No.​

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