AndreTaxCo, PLLC

Pennsylvania Cannabis & Hemp Industries 

​

IRC § 280E Analysis / R&D Tax Credit Eligibility

• Does Section 280E Apply to state individual income tax?

  • No. Pennsylvania does not conform to the Internal Revenue Code. Pennsylvania taxable income starts with state gross income. There is no provision similar to Section 280E that would disallow the expenses that Section 280E disallows.

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

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

  • The calculation of Pennsylvania corporate net income tax begins with federal taxable income and is then adjusted for certain items specified in Article IV of the Tax Reform Code. Currently, there are no adjustments for medical marijuana. A corporation must use the same amount for its Pennsylvania corporate tax return as it does for its federal return.

• 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 Pennsylvania R&D Credit Summary​

​

State Law Background

(1) Hemp State Law Authority & Background​ 

• Pa. Cons. Stat. Ann. tit. 3 § 701 to 710 (Purdon 2016)

  • Allows institutions of higher education or the Department of Agriculture of the commonwealth to research hemp under an industrial hemp pilot program.

  • This chapter shall expire if the secretary of agriculture of the Commonwealth determines a federal agency is authorized to regulate hemp.

​

(2) Medical Marijuana State Law Authority & Background

• Statutory Language (year) - SB 3 (2016) Signed by governor 4/17/16

  • 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 – N/A

• Are sales of medical marijuana subject to sales tax?

  • No, the sale of medical marijuana is not subject to sales tax..

    • For reference: Medical Marijuana Gross Receipts Tax

• Is medical marijuana subject to an excise tax?

  • Yes. Pennsylvania imposes a Medical Marijuana Tax, which is a 5% excise tax on the gross receipts received from the sale of medical marijuana by a grower/processor to a dispensary. The tax is paid by the grower/processor. Growers/processors and clinical registrant growers/processors must submit a quarterly medical marijuana gross receipts tax return with the Pennsylvania Department of Revenue, even for periods where no taxable sales occurred.

  • For reference: Medical Marijuana Gross Receipts Tax

​

(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?

• No.