February 2023 Federal Cannabis News: U.S. Sales Are Booming, Twitter Changes Advertising Rules

Capitol Hill photograph for CWCBExpo federal news update february 2023 blog

Each month, Cannabis World Congress & Business Exposition (CWCBExpo) offers a convenient roundup of the biggest cannabis news stories and hemp headlines emerging across the nation. Get these updates in your inbox by subscribing to our email newsletter, or follow us on Instagram, LinkedIn, Facebook, or Twitter to get the most recent edition when it’s published.

The legal cannabis industry may not yet be federally legal, but as more state markets come online there is certainly a feeling that the national cannabis industry is thriving. In this month’s federal news update, we’ll explore significant developments in the industry, including the growth in nationwide cannabis sales, Twitter’s new policy on cannabis advertising, and the IRS’ recent announcement regarding tax deductions for cannabis business owners. 

Twitter now allows advertisements from select cannabis companies

While not a government entity, this news impacts cannabis companies nationwide. In a major policy shift, Twitter will now allow cannabis advertisements to run on its platform. This decision is a significant change from the social media giant’s previous stance on cannabis content, which had strictly prohibited “the promotion of drugs and drug paraphernalia.” 

With the increasing acceptance and legalization of cannabis throughout the United States, Twitter said its policy revision is intended to reflect the changing landscape and will permit cannabis companies with proper licensing to advertise their brands. 

“As of today, in certain U.S. states, we have taken measures to relax our Cannabis Ads policy to create more opportunities for responsible cannabis marketing – the largest step forward by any social media platform,” noted the announcement from Twitter. “We look forward to helping more customers unlock the power of Twitter Ads to connect with the cannabis conversation and drive their business forward.” 

Companies will be required to pass through Twitter’s approval process, a must follow a list of rules and regulations that the company outlines here. Although companies remain prohibited from promoting the sale of cannabis, this policy change makes Twitter the only significant social media site to explicitly allow cannabis advertisements on its network. Competitors like Meta (Facebook and Instagram’s parent company) and TikTok, owned by ByteDance, currently hold strict bans on such content. For many social media platforms, the reasoning is due to ongoing federal prohibition and classification of cannabis as a Schedule I substance, despite cannabis being legal in some form in most states.

Report predicts $50.7B in U.S. adult-use cannabis sales by 2028

A recent report released by the Brightfield Group projected the U.S. cannabis industry would reach $50.7 billion in sales by 2028. The report, titled “U.S. Cannabis Market Forecast,” also included data on current sales and predicted more than $31.8 billion in sales to be reached by the end of 2023.

These projections highlight the legalization efforts of several states and the continued momentum and acceptance of the industry as a whole. Brightfield Group insights manager Matt Zehner told Forbes that the high amount of cannabis sales can be attributed to the expansion of cannabis into other sectors. 

“2022 was a big year for cannabis, with seven state markets beginning sales (six adult-use, one medical), four of which only commenced in the latter half of the year,” he said. “These markets are expected to have sizable growth over the course of the year, particularly those in populous states such as New Jersey and New York, both of which have had somewhat slow openings so far. New York only began sales in the last few days of 2022, so 2023 is effectively the market’s first year.”

The report also analyzed categories of cannabis products and discovered that while flower remains the top seller, with $11.6 billion in sales in 2022, vape products followed with $5.9 billion, and infused beverages came in third, generating $290 million. 

Cannabis operators may now qualify for some tax deductions

During a panel session at the 2023 American Bar Association Mid-Year Tax Meeting, IRS Office of Chief Counsel Luke Ortner announced that cannabis business owners will likely be able to file deductions on their personal taxes this year. In other words, the IRS will not automatically challenge claims made by cannabis business operators for the IRC Sec. 199A deduction

Enacted by the Tax Cuts and Jobs Act, Section 199A provides a deduction of up to 20% of pass-through income for qualified business owners. In other words, it offers many owners of sole proprietorships, partnerships, S corporations, and some trusts and estates, a deduction of income from a qualified trade or business on their personal tax return. 

Despite this development, it’s important to note that cannabis business owners are still subjected to IRS Sec. 280E, which denies deductions for the business expenses of any trade or business that traffics a controlled substance listed as Schedule 1 and 2 of the DEA’s list. 

While confusion remains regarding whether or not cannabis business owners could claim income deductions from a qualified trade or business on their tax returns, the recent change will provide some guidance and help business owners avoid uncertainty and surprises regarding filing and audits. It’s also important to note that while Ortner reported this decision, the IRS has yet to issue formal guidance on IRC Sec. 199A eligibility for cannabis operators. Business owners and operators should continue to consult with a tax professional to determine their eligibility for deductions. 

Stay informed with CWCBExpo

With increasing momentum toward federal legalization, cannabis businesses must remain informed about the latest developments in the industry nationwide. CWCBExpo provides a platform for industry professionals to stay up-to-date with the latest news and happenings and opportunities to connect with other key industry players. Stay in the loop on the latest news and happenings with our monthly news updates and more

Scroll to Top
Loading...