AndreTaxCo, PLLC

Arkansas Cannabis & Hemp Industries 

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

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

  • No. Arkansas does not conform to Federal. Arkansas imposes tax on the entire net income of individuals. Ark. Code Sec. 26-51-201. Net income is AGI with deductions allowed. See Ark. Code Sec. 26-51-403(a). AGI means gross income with certain deductions, including trade or business deductions. See Ark. Code Sec. 26-51-403(b)(1). In calculating net income, deductions allowed by IRC 162 are allowed. However, there is no reference to 280E or state provisions.

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

  • No. Similar rules for corporations – no reference to 280E or similar state provision. 

• 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.  

• 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 Arkansas R&D Credit Summary​

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State Law Background

(1) Hemp State Law Authority & Background​

• Ark. Stat. Ann. § 2-15-401 et seq.

  • Creates the Arkansas Industrial Hemp Program including a 10-year research program. 

  • Authorizes the State Plant Board to adopt rules to administer the research program and license growers.

  • Requires the State Plant Board to provide an annual report starting Dec. 31, 2018.

  • Allows the University of Arkansas’s Division of Agriculture and the Arkansas Economic Development Commission to work with the State Plant Board.

  • Establishes a separate program fund, which will include feeds collected and other sources of funding

 

(2) Medical Marijuana State Law Authority & Background

• Statutory Language (year) - Issue 6 (2016)

  • Patient Registry or ID cards - Yes

  • Allows Dispensaries - Yes

  • Specifies Conditions - Yes

  • Recognizes Patients from other states - Yes

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

• Are sales of medical marijuana subject to sales tax?

  • Yes. The sale of usable marijuana is subject to Arkansas state and local sales taxes at the same rate as other tangible personal property. "Usable marijuana" means the stalk, seeds, roots, dried leaves, flowers, oils, vapors, waxes and other portions of the marijuana plant and any mixture or preparation thereof.

• 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.

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(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

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

• No.​