Trump Administration Marijuana Shift Aids Ohio Cannabis Industry

Federal Reclassification Removes 280E Tax Barrier

Ohio cannabis operators can now deduct ordinary business expenses—rent, payroll, utilities—following the federal reclassification of marijuana from Schedule I to Schedule III. Under the Internal Revenue Code, §280E prohibits businesses trafficking in Schedule I or II controlled substances from claiming any deduction or credit except cost of goods sold. The Trump administration's reclassification, finalized in May 2026, moved cannabis to Schedule III. That renders §280E inapplicable to state-licensed operators.

Ohio's 120 licensed dispensaries and 28 licensed cultivators immediately gained access to deductions that multi-state operators in other markets have estimated at 30-40% effective tax-rate reduction. The change doesn't alter Ohio's state-level cannabis tax structure—adult-use sales remain subject to a 10% excise tax and standard sales tax—but it materially improves federal taxable income calculations.

Ohio Division of Cannabis Control spokesperson Jennifer Hayes said the agency has fielded questions from licensees seeking clarity on how the federal change interacts with state reporting requirements. The DCC doesn't administer federal tax compliance. It has coordinated with the IRS Cincinnati office to ensure operators understand the new filing obligations.

Ohio Operators Report Immediate Cash-Flow Improvement

Licensed operators in Columbus, Cleveland, and Cincinnati report improved cash flow and reinvestment capacity within weeks of the federal rule taking effect. Green Harvest Ohio, a vertically integrated MSO operating four dispensaries and one cultivation facility, disclosed in a June 20 investor update that it expects to reduce its 2026 federal tax liability by approximately $1.8 million compared to 2025, attributable entirely to newly allowable deductions.

The ability to deduct payroll and facility costs on a federal return transforms the unit economics of every Ohio dispensary.

The company's CFO, Michael Tran, told investors the savings will fund a planned expansion of its Dayton cultivation site and accelerate hiring. Green Harvest Ohio employs 140 full-time workers across its Ohio operations. Tran noted that the federal change doesn't eliminate state-level compliance costs but removes what he described as "an arbitrary federal penalty on a state-legal business."

Smaller operators echo the sentiment. Buckeye Botanicals, a single-location dispensary in Toledo, projects $120,000 in federal tax savings for fiscal 2026. Owner Sarah Kim said the funds will allow the business to offer employee health insurance for the first time since opening in 2023.

State Revenue Projections Unchanged; Federal Audit Risk Declines

Ohio's projected cannabis tax revenue remains stable at $275 million for fiscal 2026, as the federal change affects only federal income tax calculations, not state excise or sales taxes. The Ohio Department of Taxation confirmed that the reclassification doesn't trigger any adjustment to state tax code provisions. Ohio's cannabis tax framework, established under HB 86 (2023), imposes a 10% excise tax on adult-use sales and a 3% excise tax on medical sales, both calculated at the point of sale.

Operators report a secondary benefit: reduced IRS audit risk. Under Schedule I classification, cannabis businesses faced heightened scrutiny and frequent audits challenging COGS calculations. The Schedule III designation aligns cannabis businesses with pharmaceutical and other regulated industries, normalizing audit procedures. For full background on this story, see the CannIntel topic hub on Trump marijuana policy.

Ohio's 120 dispensaries generated $980 million in combined sales in 2025, according to DCC data. The federal tax relief doesn't change the state's licensing cap or expand the number of available licenses, but it materially improves the financial viability of existing operators.