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Iowa Regulators Push To Exempt Medical Marijuana From Sales Tax And To Decouple State From Federal 280E Penalty On Businesses



“They’re still going to get that hit from 280E…at the federal level, but at the state level, that burden could be reduced.”

By Robin Opsahl, Iowa Capital Dispatch

Iowa’s Medical Cannabidiol Board will ask the state Legislature to exempt medical marijuana products from Iowa’s sales tax and change its business licensing procedure for dispensaries.

Iowa could follow other states’ lead in reducing costs for business owners and patients through changing state taxing systems for medical marijuana, board members said Friday. That includes exempting medical cannabidiol products from the state sales tax, as well as changing how the Iowa tax code classifies the sale of controlled substances.

Marijuana is a Schedule I drug under the federal Controlled Substances Act, and the Internal Revenue Code Section 280E penalizes businesses that sell Schedule I or II drugs by not allowing the deduction of “ordinary and necessary” business expenses. There are no current provisions in Iowa’s tax code that states 280E does not apply, as some other states with legal cannabis have added.

“[It] essentially just decouples, you know, Iowa’s tax code from the federal code for these purposes,” Owen Parker, Bureau Chief for the Board said. “They’re still going to get that hit from 280E, you know, that I mentioned at the federal level, but at the state level, that burden could be reduced.”

Iowa currently follows the federal system for taxing companies dealing with controlled substances, even as their own state law differs on the substance legality. But the federal system may soon change as well. President Joe Biden called in October for the U.S. secretary of health and human services and the attorney general to review marijuana’s scheduling. If the substance is reclassified, these tax penalties would no longer apply to dispensaries.

While the changes to code would lessen some of the tax burden on medical marijuana companies, there are still other state measures in place that would remain. Iowa has a “drug stamp” tax of $5 on each gram or portion of processed marijuana, and $750 per unprocessed plant. Payment is required upon possession and goes toward the state general fund.

In addition to the tax changes, members unanimously approved several other recommendations, which also include the licensing of new dispensaries, adding new members to the board and changing the program’s title to the “Medical Cannabis Act.” Some of these recommendations are carried over requests from the previous legislative session, Parker said.

Board raises concerns about telehealth prescriptions

Members of the board raised concerns Friday about telehealth services that prescribe patients access to medical marijuana. Board members said telehealth has been an increasing option for people seeking access to the substance in Iowa.

To prevent people from getting prescriptions to cannabis who do not have a legitimate need, the board said the state should look at implementing measures that other states have in place such as requiring in-person doctor visits or an initial approval for a shorter period of time.

Dr. Robert Shreck, a board member, said while primary care providers who recommend waivers for cannabis know the patient’s medical and personal history, that’s often not the case with telemedicine providers.

“So we now have, I understand, telemedicine physicians or providers, physicians who will see you on telemedicine and provide you with a certification, which you can then use to go get your card and buy the drugs,” Shreck said. “To me this is a complete total perversion of what the legislation intended.”

The board proposed a study committee on telehealth with eventual plans to recommend new restrictions on telehealth providers to be discussed in the Legislature.

This story was first published by Iowa Capital Dispatch.

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