As I'm sure we've all seen, marijuana is now legal for recreational use in both Colorado and Washington state. Now, the pressing question of "how can I make money on this?" arises. Obviously, we could go out to Denver and open up a shop, but when you're already working 60-80 hours a week, that seems like an awful lot of trouble when you could simply acquire an existing shop. Which brings up the question of valuation.
Not surprisingly, the calculation of common statement lines is a bit trickier, making the process of valuation a bit more cumbersome. For instance, recently a US tax court said that dispensaries cannot deduct business expenses on their tax returns. This came as a result of an owner building a vapor room and posting it to schedule C, filing the charge on their tax return, and gettting chided by the authorities as such deductions are invalid under section 280E. Also disallowed are deductions for wages, advertising, and supplies among others.
The curious wrinkle here is that the same judge who said that business expenses cannot be deducted noted that marijuana purchases, in fact all COGS, does not qualify as a deduction under 280E and can be used to reduced revenue for the purposes of tax reporting.
So, here we are, weird statements with differing tax treatments, no public comparables, and an awfully grey market with very little data to work from. How do you value a company like this? What do you monkeys think?
tl;dr - Pot shops in CO & WA look tricky to value for tax reasons. Thoughts?