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Minnesota Cannabis & Hemp Industries 

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

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

    • Yes. Minnesota conforms to the Internal Revenue Code. The starting point is Federal taxable income. There is no provision that states Section 280E does not apply.

    • For reference: Medical Cannabis Laws and RulemakingTax Information on Medical Cannabis

    • Medical cannabis manufacturers can deduct certain expenses that were claimed on their federal tax return. No additional form is required because Minnesota follows federal tax treatment of business expenses. Generally:

      • They can deduct expenses reported on federal Form 1125A, Cost of Goods Sold. 

      • They cannot deduct “ordinary business expenses” covered by Section 162 of the Internal Revenue Code pursuant to Section 280E.

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

    • No​, subject to further 280E restrictions. 

  • 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 Minnesota R&D Credit Summary​

State Law Background

(1) Hemp State Law Authority & Background​ 

  • Minn. Stat. § 18K.01 to 18K.09 (2016)

    • Establishes a commercial hemp licensing program overseen by the Minnesota commissioner of agriculture.

    • Applicants must prove they comply with all federal hemp regulations, meaning that commercial licenses may not be available until federal law changes.

    • Allows the commissioner to implement an industrial hemp pilot program. Institutions of higher education may apply to participate in this program.

(2) Medical Marijuana State Law Authority & Background 

  • Statutory Language (year) - SF 2471, Chapter 311 (2014)

    • Patient Registry or ID cards - Yes

    • Allows Dispensaries - Yes, limited, liquid extract products only

    • Specifies Conditions - Yes

    • Recognizes Patients from other states - No

    • State Allows for Retail Sales/Adult Use - N/A

  • Are sales of medical marijuana subject to sales tax?

    • No. Medical cannabis is not subject to sales or tobacco tax. However, sales tax applies to the purchase of a vaporizing device used for medical cannabis.

    • Sales Tax Exemptions. Medical cannabis manufacturers may be eligible for the following sales tax exemptions on certain purchases:

      • Agricultural production

      • Farm machinery and equipment

      • Capital equipment exemption

      • Industrial production exemption

  • Is medical marijuana subject to an excise tax?

    • No

(3) Recreational Marijuana State Law Authority & Background​​​ - N/A​

  • Are sales of recreational marijuana subject to sales tax?

    • N/A.

  • Is recreational marijuana subject to an excise tax?

    • N/A.

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

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