AndreTaxCo, PLLC

Massachusetts Cannabis & Hemp Industries 

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

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

  • Yes. Massachusetts conforms to the Internal Revenue Code. The starting point is Federal Adjusted Gross Income. There is no provision that states Section 280E does not apply.

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

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

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

  • No, subject to 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 Massachusetts R&D Credit Summary​

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State Law Background

(1) Hemp State Law Authority & Background​ 

• Mass. Gen. Laws. Ann. 128 § 116 to 123 (2017)  

  • Allows for hemp to be planted, grown, harvested, possessed, bought or sold for research or commercial purposes under the regulation of the Massachusetts Department of Agricultural Resources (MDAR).

  • Requires producers and distributors to obtain a license issued by MDAR and for persons utilizing hemp for commercial or research purposes to register with MDAR.

  • Directs MDAR and Commissioner of Agriculture to promulgate rules and regulations.

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(2) Medical Marijuana State Law Authority & Background 

• Statutory Language (year) - Question 3 (2012) Regulations (2013)

  • 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 - Question 4 (2016)

• Are sales of medical marijuana subject to sales tax?

  • Generally, no. Sales of medical marijuana to a qualifying patient or the patient's personal caregiver pursuant to a written certification by a licensed physician are exempt.

  • For reference: Massachusetts Department of Revenue Directive

• Is medical marijuana subject to an excise tax?

  • No.

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(3) Recreational Marijuana State Law Authority & Background​​​

• Ballot Measure: Question 4 — Approved Nov. 8, 2016 by 53.66% of voters

• Law: Regulation and Taxation of Marijuana Act

  • State Website: Massachusetts Cannabis Control Commission

  • Effective: Dec. 15, 2016

  • Massachusetts Medical Marijuana Laws: Medical cannabis patients are not subject to the limits of the recreational law and may possess up to 10 oz (a 60-day personal supply).

  • Possession and Cultivation Limits: Age: 21+

  • Usable Marijuana: up to 1 oz

  • Plants: up to 6 plants; no single residence may exceed 12 plants

  • Hash & Concentrates: up to 5 g. Possession of hash is illegal though decriminalized for possession of up to 1 oz.

• Are sales of recreational marijuana subject to sales tax?

  • Yes. Sales of recreational marijuana are subject to state sales tax (plus applicable local taxes).

• Is recreational marijuana subject to an excise tax?

  • Yes. Retail sales of marijuana are subject to a 10.75% excise tax (the excise tax was initially 3.75%, but Section 12 of H3818 increased the excise tax to 10.75%).

  • For reference: Department of Revenue Marijuana Retail Taxes

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

• Yes. Massachusetts imposes a Controlled Substances Tax. No dealer may possess any marihuana or controlled substance on which a tax is imposed unless the tax has been paid, as evidenced by a stamp. A “dealer” is a person who, in violation of Massachusetts law, manufactures, produces, ships, transports, or imports into the state, or in any manner acquires or possesses more than 40 grams of marijuana. The tax is $3.50 per gram of marijuana. Dealers pay the commissioner for stamps or indicia that they must affix to the marijuana or substance. The tax does not apply to persons lawfully in possession of marijuana. See Mass. Gen. L. Chapter 64K Sec. 6.

• For reference: Massachusetts Controlled Substances Tax