What you Should Know about the Possibility of Cannabis being Rescheduled
By Sandy Suchoff, Founder and Principal at The Canna CPAs
The winds of change are blowing through the cannabis industry, and the prospect of de-scheduling
cannabis from Schedule 1 of the Controlled Substances Act has captured the attention of industry
players, policymakers, and enthusiasts alike. While the allure of reduced restrictions on cannabis is
tantalizing, we must examine the potential ramifications and challenges that may arise if this
monumental shift were to occur.
From Schedule 1 to Schedule 3: A New Beginning
The de-scheduling of cannabis from Schedule 1 to Schedule 3 would undoubtedly mark a pivotal
moment in the industry’s history. It could alleviate some of the burdens imposed by the infamous IRC
280E, which currently hinders cannabis businesses by disallowing deductions for ordinary business
expenses. With de-scheduling, the punitive tax law may no longer apply to cannabis touching entities,
potentially freeing up much-needed capital for growth and innovation.
The Hidden Tax Burden
However, as with any major change, there are often unforeseen consequences. De-scheduling could
open the door to the imposition of a federal excise tax on cannabis. While this may seem like a step in
the right direction, it could introduce a tax burden even more punitive than 280E, especially for growers
and processors. Retailers, who have fewer costs associated with cost of goods sold (COGS), currently
bear the brunt of 280E, but a new excise tax could shift the balance of taxation.
The Regulatory Quagmire
Furthermore, we must consider the potential for increased federal oversight and regulation. De-
scheduling may invite federal agencies like the FDA to micromanage cannabis companies, setting
stringent compliance and safety standards. While ensuring product quality and safety is vital, the cost of
compliance and navigating the regulatory landscape could prove prohibitive for smaller operators.
The Triumph of Big Players
One concern is that de-scheduling may inadvertently favor large corporations with deep pockets. Big
Pharma, multi-state operators (MSOs), and established players like Pepsi Cola and Walgreens could seize
the opportunity to dominate the market, leaving smaller operators struggling to compete. This shift
could stifle diversity and innovation in the industry, hindering the growth of smaller, local businesses.
International Implications
De-scheduling also has international implications. The federal government may be reluctant to allow
cannabis imports from countries like Canada, South America, or Asia, potentially stifling international
trade opportunities and limiting the industry’s global reach.
In conclusion, the de-scheduling of cannabis is a double-edged sword. While it offers the promise of
reduced tax burdens and greater legitimacy for the industry, it also raises questions about new taxes,
increased regulation, and the potential dominance of large corporations. As we navigate this evolving
landscape, it’s crucial to strike a balance that ensures equitable opportunities for all industry players, big
and small, and safeguards the growth and diversity of the cannabis market.
The road ahead may be uncertain, but one thing is clear: as the cannabis industry evolves, it’s essential
to stay informed, engaged, and ready to adapt to whatever changes may come our way. De-scheduling
cannabis is just the beginning of a new chapter in this remarkable journey.
The Canna CPAs can help you navigate the intricacies of cannabis accounting. Call today to find out more
at 833-CPA-CANA or 833-272-2262—or simply email info@thecannacpas.com.
Disclaimer: This article is for informational purposes only and should not be considered legal or financial
advice. Always consult with legal and financial professionals for guidance on specific issues related to
your cannabis business.
Sandy Suchoff, CPA is the Founder and principal of Lefstein-Suchoff, CPA & Associates, LLC D/B/A The Canna CPAs. Suchoff has been featured and interviewed on MSNBC, FOX News, and Tune In Business Talk Radio as a tax advisor, as well as ONR Oklahoma PBS TV, Chasing News on FOX & WOR, KRQE 13, Cannabis Radio, Purple Haze Radio, and Cannabis Tech & Today as an advisor on cannabis tax and accounting.
