Sarah Bantz on 280E, rescheduling uncertainty, and the realities of cannabis tax planning

Missouri cannabis operators have spent years navigating one of the most complex tax environments in the country. Few understand those challenges better than Sarah Bantz, CPA, Director of Cannabis Accounting and Advisory Services at Smith Patrick, and treasurer of  JAINE

In a recent interview with Greenway, Bantz broke down the mechanics of Internal Revenue Code Section 280E, the practical burdens it places on operators, and why recent federal headlines do not yet translate into tax relief for 2026 (Transcript

280E in plain terms

For many operators, 280E is shorthand for “we pay too much in federal tax.”

Bantz explains.

“Basically, you have your income, you have your sales, and then you have certain kinds of expenses that are your cost of sales or your cost of goods,” Bantz said.

“Per 280E, that is the only cost you can deduct from sales to get to your taxable income. Everything else you paid for – the heat, the person to sell it, your license fees, all that jazz, not deductible.”

The result is a distorted tax base.

“Your taxable income ends up being significantly higher and therefore your tax is significantly higher. It’s often to the point where you literally have a loss and yet you owe federal income tax,” she said. “It’s tough. It’s really tough.”

Marketing, selling costs, and many operational expenses fall into what Bantz described as a “big bucket of no-no type of stuff.”

Even under a liberal reading of the statute, she said, “selling costs and marketing costs end up not being deducted.”

Inventory, timing, and IRS scrutiny

While much of the public conversation around cannabis tax centers on deductibility, Bantz emphasized that timing is just as critical.

“There’s also an issue of when you can deduct it,” she said. Because cannabis operators must capitalize inventory-related costs, deductions often trail actual cash outlays.

   

Using a packaging example, Bantz explained: “If you buy $40,000 worth of packaging in December of 2025 and then you use $10,000 of that in stuff that you sell in December of 2025, you only get to deduct $10,000 of that. The other 30 gets banked to the balance sheet and moved into the next year.”

For smaller entities, that often means working with estimates and consistent methodology rather than perfect precision. But consistency matters.

“Tracking the timing of when you can deduct things is an important part of showing to the IRS that you have an inventory method and that your method is ABC,” Bantz said. “They will want to see that you have a method and that that method follows the income.”

The principle is straightforward: “The expense follows income.”

Rescheduling and executive order realities

In December, federal headlines fueled optimism that cannabis rescheduling could bring immediate tax relief. Bantz cautioned that the path forward is slower and more uncertain than many assume.

“Rescheduling is a long road,” she said. “There are a lot of steps to it. There is a law, and the law reads a certain way, and there’s rulemaking, and you have to do the rulemaking and do the public comment period and have the hearings and get the input. Go back to the rulemaking and all of that takes time.”

“We’re six weeks in since the executive order. And I see nothing. I mean, that thing is still on the shelf gathering dust.”

Her practical advice to clients reflects that uncertainty.

“Right now, I’d say it’s going to look just like 2025,” she said. In other words, operators should plan under existing 280E constraints unless and until formal changes occur.

As cannabis operators look toward 2026 and beyond, Bantz’s message is measured but clear: until federal law formally changes, tax planning must remain grounded in current reality.

“Nothing’s changed,” she said.

To listen to more from Sarah Bantz, check out her recent appearance on Greenway Audio Magazine,