AndreTaxCo, PLLC

Hawaii 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. Act 230, SLH 2016 (Act 230) allows taxpayers engaged in medical marijuana businesses to deduct business expenses and claim tax credits on their income taxes. Act 230 is effective for taxable years beginning after December 31, 2015. See Haw. Rev. Stat. § 235-2.4(r).
    Applicable to tax years beginning after December 31, 2015, Section 280E does not apply to the production and sale of medical marijuana and manufactured marijuana products by dispensaries licensed under Chapter 329D and their subcontractors. See Haw. Rev. Stat. § 235-2.4(r).

  • For reference: Hawaii Department of Taxation announcement

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

  • No. The same rule that applies to individuals applies to corporations. See Haw. Rev. Stat. § 235-2.4(r).

• 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 Hawaii R&D Credit Summary​

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State Law Background

(1) Hemp State Law Authority & Background​

• Hawaii Rev. Stat. § 141A to 141J and § 712 (2016)

  • Establishes an industrial hemp pilot program overseen by the Hawaii Department of Agriculture

  • Allows the Board of Agriculture to certify hemp seeds

 

(2) Medical Marijuana State Law Authority & Background 

• Statutory Language (year) - SB 862 (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 – N/A

• Are sales of medical marijuana subject to sales tax?

  • No – Hawaii does not have a sales tax; instead, it has a General Excise Tax. See General Excise Tax below. 

• Is medical marijuana subject to an excise tax?

  • Yes. Hawaii’s General Excise Tax applies to sales of medical marijuana. See Haw. Rev. Stat. § 237-24.3(6).

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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.