What 280E Means for Your Marketing Budget
Why your advertising costs more than a normal retailer's, and what that means for how you choose campaigns.
5 min read
Section 280E of the federal tax code blocks businesses that sell federally controlled substances from deducting ordinary business expenses. For dispensaries, that includes advertising.
Here's what that means in plain terms: a normal retailer that spends a dollar on ads gets part of it back at tax time. You don't.
The math
A retailer at a 21% federal corporate rate spends $1.00 on advertising and deducts it, which saves them about $0.21. The ad really costs them $0.79. You spend the same $1.00 and deduct nothing. It costs you $1.00.
Over a year, a $24,000 campaign costs a normal business about $18,960 after tax. It costs you the full $24,000.
What that changes
- Waste costs you more. Every untargeted impression is paid in full, after-tax dollars.
- Measurement matters more. If you can't see what a campaign brought back, you can't defend the spend.
- Targeting matters more. Reaching someone who already buys cannabis nearby is worth more than reaching everyone in a zip code.
What it doesn't change
280E doesn't mean you shouldn't advertise. Your competitors are dealing with the same rule. The stores that grow are the ones that spend carefully and measure closely, not the ones that stop.
A note on advice
We're marketers, not accountants or attorneys. How 280E applies to your business, and what you can and can't allocate to cost of goods sold, is a question for your CPA. What we can tell you is how to make each advertising dollar work harder.