Glossary
280E
Internal Revenue Code §280E disallows ordinary business deductions for businesses trafficking in Schedule I or II controlled substances. Since the April 2026 order, state-licensed medical cannabis is Schedule III and out of 280E; adult-use cannabis remains Schedule I and under it. Cost of goods sold (§471) remains deductible either way.
Why it matters for reconciliation: the store's books must show which costs are inventory cost, as the definition says, so the cost behind each package has to be traceable to the state record.
Example: an adult-use retailer records the cost of each package next to its package tag, so any cost figure in the books can be traced back to a package in the state system.
Where this comes up on budally.com
Related terms
- COGS (cost of goods sold)
The cost of inventory sold in a period. For cannabis it is the one deduction 280E allows on adult-use activity, so package-level landed cost matters: invoice cost at accepted quantity, freight, and Michigan's wholesale tax booked into inventory cost.
- Schedule III
The federal controlled-substance schedule that FDA-approved marijuana products and state-licensed medical marijuana were moved to on April 22–23, 2026, removing qualifying medical activity from 280E. Adult-use remains Schedule I.
- Dual-license
An operator holding both medical and adult-use licenses at a premises. Since April 2026, federal guidance asks dual-license operators to separate medical and adult-use activity in operations and recordkeeping.