It turns out that legal marijuana businesses in states like Colorado are still being treated like illegal drug trafficking operations. Due to archaic federal law taxes, where a normal business might pay a 30 percent on taxable income, a marijuana shop could pay 70 percent or more, thanks to a law Congress passed in 1983 (provision 280E) that bans tax credits and deductions from the “the illegal trafficking in drugs.”

In other words, the federal bureaucracy is clashing with state-level marijuana laws, like those in Colorado, which are hammering local weed businesses with unfair tax burdens that cripple their ability to turn a profit.

“I had to write a check for $275, 000,” said Bruce Nassau, owner of five marijuana shops in Colorado.

Unlike other legal businesses, weed-friendly operations cannot deduct costs on bills, salaries, rent and other costs – which forces them to pay high taxes on large portions of their income.

“There’s no reason that [legal and licensed marijuana businesses] should be taxed out of existence by the federal government,” said Rachel Gillette, executive director of Colorado’s National Organization for the Reform of Marijuana Laws.

Weed-friendly states like Colorado and Oregon are now passing laws that allow marijuana businesses to take deductions on state and federal returns.

The reality is that applying federal tax laws to the growing marijuana economy lacks a clear direction. According to accountants and tax lawyers, marijuana sellers can take marijuana itself (and the costs associated with growing) off their taxes, which is ironic. Dispensary owners, however, have used their large tax contributions as leverage towards being treated legitimately under federal law.

Tim Cullen, co-owner of five marijuana shops in Colorado, put it like this: “We’re not a black-market cocaine dealer. We’re totally on board and on the level. We’d like to be treated as such.”

In the end, high taxes will continue to hurt legal marijuana businesses until antiquated federal tax laws are modernized for states where marijuana is a legal business.