Massachusetts cannabis is standing in two storms at once: a federal tax code that treats licensed operators like criminals and a state ballot effort that could try to shut down the adult-use market entirely.
For operators, especially equity operators, this isn’t theoretical policy talk. It’s payroll, pricing, and survival, determining whether the people most harmed by prohibition can build wealth in the legal market. For consumers, it’s access to tested products, jobs, and local tax revenue, deciding if the market keeps moving forward or gets pushed back into the shadows.
The Massachusetts ballot question that could erase adult use
A campaign called the Coalition for a Healthy Massachusetts is seeking to place a 2026 ballot question that would repeal adult-use legalization and submitted 76,000+ signatures in support of the measure by the necessary deadline. The state has to validate the signatures, and the campaign is cutting it close because petition sheets can be invalidated for technical reasons.
If that effort advances and ultimately passes, the state’s adult-use market — cultivation, manufacturing, testing, distribution, retail — would be terminated, leaving only medical access, even though possession would remain decriminalized up to certain limits.
The scale here matters. Since adult-use stores began opening in late 2018, Massachusetts has become an economic engine: billions in sales and roughly $1.5 billion in excise/sales tax revenue have flowed into the Commonwealth, along with tens of thousands of jobs.
And Worcester County, our backyard, has been one of the biggest drivers of that legal market growth.
The federal tax problem: 280E was built to punish, not regulate
At the federal level, cannabis operators aren’t taxed like normal businesses because of IRC Section 280E, added in 1982. It disallows standard deductions and credits for businesses deemed to be “trafficking” in Schedule I or II controlled substances, even when a business is fully legal at the state level.
That’s why operators can face extreme effective tax rates: you can’t deduct many normal expenses, so taxable income becomes disconnected from reality.
This is where the industry’s “280E position” comes from: state-legal cannabis can be forced into federal tax treatment designed for illegal markets.
What Schedule III could change — and what it wouldn’t
Right now, reporting suggests President Trump is considering, or preparing steps toward, rescheduling marijuana to Schedule III. Schedule III would recognize accepted medical use under federal law and, critically, would remove cannabis from 280E, because 280E applies to Schedule I and II substances.
But rescheduling is not legalization.
It would not automatically fix banking, interstate commerce, or the messy patchwork of state markets. And some industry voices warn that a medical framing could invite tighter federal scrutiny under pharmaceutical-style standards, potentially advantaging larger players with deeper compliance budgets.
So yes, Schedule III could bring real tax relief. But it could also reshape the playing field in ways that require equity operators to be even more prepared, more organized, and more protected.
Where 471(c) fits into the conversation
Where 471(c) fits into the conversationSome operators and tax professionals talk about Section 471(c) (the small business inventory accounting rules) as a strategy that may allow more costs to be captured in cost of goods sold, potentially reducing 280E impact for qualifying businesses — though it’s also widely seen as an aggressive area and not a simple “fix.” Government watchdog reporting has noted concerns about unintended consequences and the need for clearer guidance.
The practical takeaway: The tax landscape is complicated, and small operators often pay the highest price for complexity because complexity costs money to navigate.
Equity and taxes: the uncomfortable truth
Here’s what rarely gets said plainly: when taxes crush margins, the market doesn’t become “safer.” It becomes more consolidated.
Bigger operators can survive thin margins longer. Equity operators and independent retailers can’t. And the more pressure the market experiences — federal taxes, falling prices, restrictive capital, regulatory cost — the easier it is for ownership diversity to shrink even while overall sales grow.
Massachusetts has tried to push against that with social equity investments. The state’s Executive Office of Economic Development has administered Social Equity Trust Fund grant programming, including $26 million in grants to 180 entrepreneurs and earlier grant rounds for urgent business needs.
That’s meaningful. But if federal taxation stays punitive, and if adult-use is threatened at the ballot box, equity becomes fragile because the foundation beneath it keeps shaking.
What a serious federal approach could look like
If the federal government is going to change cannabis scheduling, it should do it with a full economic plan attached:
- End 280E through rescheduling or legislation and make the transition workable for small operators.
- Pair reform with federal economic development support that mirrors what Massachusetts is doing at the state level, especially for operators from communities disproportionately harmed by prohibition.
- Build a federal equity framework that promotes ownership and management pathways, not just participation, and treats reparative investment as economic strategy, not charity.
Why this moment matters for consumers, too
Consumers should care about taxes and ballot questions because the outcomes show up immediately:
- Higher operator tax burdens can mean higher prices or fewer options.
- Repealing adult-use doesn’t erase demand — it can push people back toward untested products and informal markets.
- Communities lose jobs, local option tax revenue, and the stability that comes with a regulated supply chain.
Closing
Massachusetts is being asked — again — whether it wants to move forward or reverse course. At the same time, the federal government may be approaching the biggest shift in cannabis policy in decades, with tax relief potentially on the table but new complications behind it.
For equity operators, the goal is simple: fair rules, fair taxes, and a real chance to build something durable. For consumers, the goal should be just as clear: protect access, protect safety, and protect the local economic ecosystem that legalization created.
If cannabis is going to be a legitimate American industry, it has to be treated like one—by the IRS, by state policymakers, and by the voters who decide whether Massachusetts keeps the doors open.
Related reading
- Massachusetts CCC: 2024 sales record and tax revenue CCC Massachusetts
- Cannabis ballot petition signature process and timeline Cannabis Business Times+1
- What Schedule III could mean for operators and taxes The Washington Post+1