Steve Schain, attorney for Smart Counsel LLC, which serves the cannabis, hemp and psychedelics industries, said the greatest challenge for cannabis businesses financially are tax restrictions. 

“Under section 280E of the Internal Revenue tax code, any plant touching cannabis-related business can only deduct the cost of goods sold,” he said. “Utilities, wages, insurance, all normal business deductions, are denied to cannabis businesses. Second, basic business tools are often denied to cannabis companies like bankruptcy.”

And businesses making products with delta-9 tetrahydrocannabinol (THC), which is the psychoactive ingredient in cannabis, cannot sell products over state lines.

“Presently, although allowable in 38 different United States along with the commonwealth of Guam, Puerto Rico and the Northern Mariana Islands, cannabis cannot be moved between the states,” Schain said. “As a result, ridiculous inefficiencies exist from this lack of economies of scale, preventing serious profitability.”

Although consumers are interested in cannabis edibles, it’s likely not something most bakers are going to want to do.

“For bakers, the writing is on the wall, and the wall is out of reach,” Schain said. “Forty-two percent of cannabis consumed in America is ‘flavored.’ Clearly Americans want to consume cannabis in forms other than smoking and vaping. Unfortunately, our archaic system of licensure prevents current bakers from obtaining the ability to produce infused baked goods.”

This article is an excerpt from the December 2024 issue of Baking & Snack. To read the entire feature on Cannabis/CBD/Hemp, click here.