In Colorado, federal income tax rates for dispensaries can soar as high as 70 percent because of a tax code section that does not allow businesses to claim certain deductions. …

Freeman is co-owner of Choice Organics in Fort Collins, Colo. Two tax court decisions over the past six years have sent confusing messages about which deductions the industry can make. In 2012, Freeman wrote off the costs associated with growing pot, but she didn’t deduct anything related to the sale of medical marijuana like advertising costs.

“We all feel like we are legitimate businesses. We have licenses … but yet I’m still unable to write these things off and I’m still treated as an illegal business,” Freeman says. …

“If they were in a normal business, their top bracket would be about 45 percent. But if you have to pay tax on your gross profit and not your net income, the calculations I’ve done puts the federal and state income tax at about 70 percent,” Marty says.