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Run the Payroll Fee Auditor →Blog · Payroll Management · Cannabis
Cannabis Businesses: Payroll Tax Guide (2026)
Payroll tax for a cannabis business is the federal stack every employer runs, withholding, 7.65 percent employer FICA, FUTA, deposits and Form 941, plus the cannabis business items this page cites: IRS Cannabis industry frequently asked questions, IRS Cannabis industry frequently asked questions and IRS Cannabis industry. BEG: $45 per employee per month inside the payroll software you already use, live in 3 to 5 days.
Tax rules specific to cannabis businesses
IRC section 280E disallows all deductions or credits for a business that traffics in marijuana, even where the sales are legal under state law, but the business may still reduce gross receipts by cost of goods sold calculated under section 471. A dispensary may not deduct advertising or selling expenses.
A state-compliant marijuana dispensary has the same income and employment tax filing obligations as any other business. The IRS states that illegal businesses have no exemption from their employment tax obligations, and businesses in the industry face the same late filing, late payment and accuracy penalties as any other taxpayer.
Any person in a trade or business that receives more than $10,000 in cash in a single transaction or related transactions must file Form 8300 within 15 days after receiving the payment. The IRS accepts cash tax payments from unbanked taxpayers at some Taxpayer Assistance Centers by appointment.
The stack every cannabis business runs
On one of the retail salespersons at the May 2025 national median of $35,410, the employer share of Social Security and Medicare is $2,709 a year, FUTA is $42 after the 5.4 percent state credit on the first $7,000, and income tax withholding follows the employee's W-4. Deposits are monthly or semiweekly depending on the prior lookback period, with a next-business-day deposit whenever $100,000 accumulates. Form 941 is due the last day of the month after each quarter; W-2s and any 1099-NEC at the $2,000 threshold are due January 31.
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- IRC section 280E disallows all deductions or credits for a business that traffics in marijuana, even where the sales are legal under state law, but the business may still reduce gross receipts by cost of goods sold calculated under section 471. A dispensary may not deduct advertising or selling expenses. [IRS Cannabis industry frequently asked questions]
- A state-compliant marijuana dispensary has the same income and employment tax filing obligations as any other business. The IRS states that illegal businesses have no exemption from their employment tax obligations, and businesses in the industry face the same late filing, late payment and accuracy penalties as any other taxpayer. [IRS Cannabis industry frequently asked questions]
- Any person in a trade or business that receives more than $10,000 in cash in a single transaction or related transactions must file Form 8300 within 15 days after receiving the payment. The IRS accepts cash tax payments from unbanked taxpayers at some Taxpayer Assistance Centers by appointment. [IRS Cannabis industry]
Read the full guide to how to calculate payroll taxes, and the rest of the cannabis business payroll library.
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Frequently Asked Questions
Cannabis business payroll tax: IRS Cannabis industry frequently asked questions
IRC section 280E disallows all deductions or credits for a business that traffics in marijuana, even where the sales are legal under state law, but the business may still reduce gross receipts by cost of goods sold calculated under section 471. A dispensary may not deduct advertising or selling expenses.
Cannabis business payroll tax: IRS Cannabis industry frequently asked questions
A state-compliant marijuana dispensary has the same income and employment tax filing obligations as any other business. The IRS states that illegal businesses have no exemption from their employment tax obligations, and businesses in the industry face the same late filing, late payment and accuracy penalties as any other taxpayer.
What is the employer tax cost on one of the retail salespersons?
At the $35,410 national median (BLS OEWS, May 2025): $2,709 in employer Social Security and Medicare, $42 in FUTA after the state credit, plus state unemployment at the employer's assigned rate.
What does managed payroll cost for a cannabis business?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. 280E tax code payroll deductions, cash payroll documentation and state cannabis board reporting are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Cannabis Businesses. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: IRS: Understanding Employment Taxes
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