Transfer Pricing in the U.S. Cannabis Industry

Our U.S. Transfer Pricing Practice Leader, Sophia Castro Jurado, published the article “Transfer Pricing Implications for the Cannabis Industry” in the IBFD International Transfer Pricing Journal (ITPJ).

The article highlights the challenges and opportunities faced by U.S. cannabis businesses, particularly those with vertical integration or multiple operations. Among the key insights:

• Impact of Section 280E of the tax code, which restricts deductions of ordinary business expenses.
• Potential benefits from a possible federal reclassification of cannabisfrom Schedule I to Schedule III.
• Importance of strategic intercompany pricingto optimize Cost of Goods Sold (COGS).
• Relevance of robust transfer pricing documentationto demonstrate arm’s length compliance and mitigate IRS risks.