Cannabis Taxes in 2026: Half the Industry Got Relief. The Other Half Is Still Waiting.
New Jersey's legal cannabis market is now several years old, and most of the region has followed. New York, Connecticut, and Delaware all have adult-use sales. Pennsylvania is still on the holdout. It left legalization out of its 2026-27 budget again.
What changed federally?
In April 2026, the Justice Department moved state-licensed medical marijuana to Schedule III. This deregulation matters for tax purposes. Section 280E only applies to Schedule I and II substances, so medical operators can now deduct ordinary business expenses like rent, payroll, and marketing.
Adult-use is a different story. Recreational cannabis is still Schedule I, and 280E still applies. A broader rescheduling hearing was held this summer, but it was paused in late September. There is no final decision yet.
What hasn't changed?
Banking. Most cannabis businesses still struggle to get normal bank accounts, and many still run largely on cash. Congress reintroduced the SAFE Banking Act in June 2026, but it has not passed.
Where I see the biggest tax issues
• Inventory costing. Under 280E, cost of goods sold is still deductible. How you capture costs into inventory directly affects your tax bill. This is where good accounting pays for itself.
• Mixed licenses. If you operate both medical and adult-use, the two sides now get different tax treatment. Your books need to split them cleanly.
• Cash flow. Adult-use operators often owe tax on profits they don't actually have after expenses. Plan estimated payments early so April isn't a shock.
• State taxes. New Jersey layers sales tax, local transfer taxes, and a social equity excise fee. Each has its own filing rules.
The rules are moving fast, and the businesses that do best are the ones planning ahead instead of reacting.
If you run a cannabis business in New Jersey or the surrounding states, let us review your numbers.
Book a Free 30-minute Discovery call
https://calendar.app.google/yt5QvohHuanbzAu86
Written by
Dwayne Ailey, EA, Top Notch Accounting Svs, LLC
“This article is for general purpose use only; not legal tax advice please contact us for more information to your situation."