LEE, Mass. — In states like Massachusetts where marijuana is legal, it may seem like business is booming. But Canna Provisions CEO Meg Sanders said there’s a huge financial burden with selling cannabis because of the Controlled Substances Act.

Now Canna Provisions is joining others in a lawsuit against U.S. Attorney General Merrick Garland, arguing the act is unconstitutional for licensed businesses.

What You Need To Know

  • Massachusetts cannabis businesses are suing the U.S. Attorney General, arguing marijuana prohibition in legal-state markets is unconstitutional. The lawsuit was filed on Oct. 26, 2023 in the U.S. District Court for Western Massachusetts

  • The lawsuit is seeking a court ruling that "the Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law" among other rulings

  • Plaintiffs include Massachusetts-based Canna Provisions, Wiseacre Farm, and Treevit CEO Gyasi Sellers, as well as multi-state operator Verano Holdings Corp. Law firms Boies Schiller Flexner and Lesser, Newman, Aleo & Nasser LLP are representing the plaintiffs

  • IRS Tax Code 280E, which prohibits tax deduction for businesses which traffic controlled substances, is impacting cannabis businesses across the country

“Businesses have been paying this for a really long time; cannabis businesses," Meg Sanders said. "And we're not asking for any special treatment. We're just asking for the same treatment as everybody else.”

Since the creation of the Controlled Substances Act in 1970, the federal government considers marijuana a Schedule 1 Controlled Substance; in the same tier as drugs like heroin and ecstasy. Congress created tax code 280E in the 1980s to prohibit tax deductions for businesses which traffic controlled substances. Now it’s impacting the bottom line for businesses who are legally allowed to sell marijuana.

“Tax code 280E is so interesting in that it basically gives us an effective tax rate of 74%; that's a huge number," Sanders said. "I think most people that got involved in this industry had the hope that 280E would go away once enough states got on board.”

The federal corporate tax rate is 21%. Now with marijuana legalized for medicinal use in 38 states and Ohio becoming the 24th state to vote in favor of recreational use this week, Sanders is among the many hoping for fairer taxes on the cannabis industry.

“More than 70% of Americans support safe access to cannabis. We all need to get on board with that," Sanders said. "And I think it's really important that one way or the other we get treated like every other business in Massachusetts as well as in America.”

Sanders said Canna Provisions, along with their fellow plaintiffs, will continue to work to make their voices heard and hope the government takes action as soon as possible.

“We're hoping that we move along, and we get more and more people with the understanding of why this is affecting us so negatively and ultimately affecting the consumer and affecting employees," Sanders said. "Affecting this business, this industry that can be a massive, massive impact on the United States with job growth and revenue and tax money, but fair tax money, I think that's really what we're hoping to see through this.”

Spectrum News reached out to the Attorney General's Office for a response to the lawsuit and did not hear back as of Friday evening.