AndreTaxCo, PLLC

New Jersey 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. Section 280E should not apply. New Jersey does not conform to the Internal Revenue Code. New Jersey taxable income starts with Jew Jersey gross income and is adjusted for modifications. A taxpayer is subject to tax on the taxpayer’s net profits from business. A taxpayer’s net profits from business is determined by taking into account all ordinary costs and expenses incurred in the conduct of that business. There is no state provision similar to Section 280E.

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

  • Yes. 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 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 New Jersey R&D Credit Summary​

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State Law Background

(1) Hemp State Law Authority & Background​ 

• AB 1330 / SB 3145 (2018) / N.J. Stat. Ann § 4:28-1 to 4:28-5         

  • Directs the New Jersey Department of Agriculture to create a pilot program to research industrial hemp cultivation.

  • Exempts anyone participating in the agricultural pilot program from crimes and penalties relating to the purchase, sale, or cultivation of marijuana.

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(2) Medical Marijuana State Law Authority & Background

• Statutory Language (year) - SB 119 (2009)  Program information

  • 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?

  • Yes. Retail sales of medical marijuana are subject to tax. See N.J.S.A. § 54:32B-3(a).

  • For reference: New Jersey Division of Taxation Bulletin

• Is medical marijuana subject to an excise tax?

  • No.

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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.