New York cannabis businesses will be able to write off business expenses

During negotiations to finalize the state’s budget last week, legislators and Governor Kathy Hochul included an amendment to aid New York cannabis businesses.

The amendment will make a change to the state’s tax law, enabling cannabis businesses in the state to deduct business expenses related to cannabis sales from their state taxes. While it may seem like a no-brainer, this is actually a rare case in legal cannabis industries across the country.

As cannabis is still illegal on the federal level, cannabis businesses typically don’t get any sort of tax write offs. While this still applies to New York cannabis businesses when it comes to federal taxes, it at least gives businesses the chance to get some money back at the state level.

Legislators estimate the amendment will help save new cannabis businesses over $25 million annually by 2024.

"The tax rates and operational costs that cannabis businesses would (otherwise have faced) is a significant barrier," said Allan Gandelman, president of the New York Cannabis Growers & Processors Association.

Gandelman is a hemp farmer himself and a major cannabis advocate. He believes that the tax deductions are essential to help businesses become profitable within the New York legal cannabis industry early on.

Executive vice president of the state Business Council said that the Council was “pleased to see the Legislature has agreed to treat the cannabis industry as any other legitimate operating business in New York state.”

Before the amendment was passes, New York cannabis businesses weren’t favored much at all in the state tax law. In fact, the law was tied to a prohibition in the federal code against deductions for “expenditures in connection with the illegal sale of drugs." 

Senator Jeremy Cooney (Rochester) was a co-sponsor for getting the amendment passed. Cooney thinks that the change to the tax law will “allow more small business owners and entrepreneurs to participate in the new cannabis market, especially social equity owned businesses."

California is one of the few other states to pass a similar amendment. They did so in 2019 after many small cannabis businesses in the state were struggling. The hope with the New York amendment is that new cannabis businesses will have one less thing to worry about when tax season comes, bolstering the industry from the beginning.