The NOLA Cannabis Company Carrollton dispensary, which opened Dec. 18, 2025, at 1407 S. Carrolton Ave. in New Orleans, is one of 27 medical marijuana dispensaries in Louisiana, where state law allows for a maximum of 30 and requires them to be spread around nine regions.
Labeled products photographed in the restricted area of NOLA Cannabis Company Dispensary in the East Carrollton neighborhood of New Orleans, Tuesday, Dec. 30, 2025. (Photo by Sophia Germer, The Times-Picayune)
The NOLA Cannabis Company Carrollton dispensary, which opened Dec. 18, 2025, at 1407 S. Carrolton Ave. in New Orleans, is one of 27 medical marijuana dispensaries in Louisiana, where state law allows for a maximum of 30 and requires them to be spread around nine regions.
Louisiana’s two licensed cannabis growers and the more than two dozen medical marijuana dispensaries they supply around the state became eligible for massive tax break last month when the federal government changed the way it classifies medical marijuana.
The change came on April 22, when acting U.S. Attorney General Todd Blanche signed a final order from the U.S. Drug Enforcement Administration reclassifying state-licensed medical marijuana from Schedule I to Schedule III of the Controlled Substances Act, wiping out the tax penalty that has squeezed the economics of the industry since states began legalizing it nearly 30 years ago.
Even as states have loosened restrictions on cannabis — 40 states now have some form of legal marijuana — the industry has faced dramatically higher federal tax rates than other businesses because the federal government has, until now, treated marijuana as an illegal drug like heroin, LSD and ecstasy.
“It’s a draconian penalty on medical marijuana, and the federal government’s rescheduling recognizes that medical marijuana should never have been subjected to that kind of penalty,” said John Davis, president of Good Day Farms Louisiana, which produces more than 70% of the state’s legal cannabis at its 250,000-square-foot Ruston facility and effectively operates a majority of its dispensaries.
Davis said the DEA’s new classification of cannabis as Schedule III — alongside ketamine, testosterone and Tylenol with codeine — marks a “significant development” in federal policy toward medical marijuana.
Last month’s move from the Justice Department follows a December executive order from President Donald Trump directing federal agencies to fast-track marijuana rescheduling.
The biggest immediate change of rescheduling is to release medical marijuana businesses from a section of the federal tax code called 280E, which was enacted by Congress in 1982 in response to a Minnesota man who successfully argued in tax court that he should be entitled to deduct the cost of running his drug trafficking operation as valid business expenses.
The standard corporate federal income tax rate is 21% of net profits. But without being able to claim deductions or write off expenses, businesses in the marijuana industry wind up paying at more than three times that rate.
Labeled products photographed in the restricted area of NOLA Cannabis Company Dispensary in the East Carrollton neighborhood of New Orleans, Tuesday, Dec. 30, 2025. (Photo by Sophia Germer, The Times-Picayune)
“Many cannabis businesses are estimated to pay effective tax rates of up to 70%, so that makes it exceptionally costly to own a cannabis business,” said Dave Brown, a cannabis consultant and co-owner of Willow Pharmacy dispensaries on the northshore. “But prior to rescheduling, the implications of 280E disproportionately impacted the dispensaries or retailers more severely than the producer-processors.”
That’s because businesses could still deduct the cost of the goods they sell, but those costs make up a smaller proportion of expenses for dispensaries compared to farms.
Now, dispensaries like Brown’s will be able to deduct the cost of their rent or mortgages, employee payroll, marketing, utilities, equipment and depreciation of their assets.
“Our intention would be to declare the full suite of deductions that any other retail business is able to declare from their federal taxes,” Brown said.
As for the effect of rescheduling on Good Day Farms — a vertically integrated operation that grows and processes marijuana then sells its products to stores it manages through a subsidiary — Davis said it was “premature to speculate on specific operational or economic impacts at this stage.”
A representative of the state’s other licensed producer, Baker-based Ilera Holistic, declined to comment on the tax change, saying the company is still evaluating the legal implications of the recent rescheduling order.
The massive tax cut comes as Louisiana’s cannabis industry has undergone a massive expansion.
Medical marijuana producers in Louisiana sold an estimated $90.9 million worth of cannabis to dispensaries in the year ending June 30, 2025, a 77% increase compared to the prior fiscal year, according to Louisiana Department of Revenue reports.
As of early this year, nearly 150,000 Louisiana residents are enrolled in the medical program, with the number of patients more than doubling in less than two years, according to figures presented by Davis at a February meeting of the Rotary Club of Baton Rouge.
While every business involved in the production or sale of medical marijuana is poised to benefit from rescheduling, the tax cut is not evenly distributed across the country. In the 24 states where cannabis is sold without a prescription, many businesses sell both medical and adult-use cannabis products at the same storefront. That presents a challenge for accountants.
“It’s a weird federal tax regime in that situation,” said Brown, who is also a cannabis operator in Washington state and represents operators there. “Some of your business out of the same brick and mortar is considered legal by the federal government, and some of it is considered illegal or illicit, and that presents problems and costs.”
But medical marijuana is the only form of legal cannabis in the Southeast, so no marijuana businesses in Louisiana, Arkansas, Mississippi or Florida run afoul of the IRS.
And since ownership of the Louisiana medical marijuana market is more concentrated — with only two companies permitted to produce cannabis and one of them operating a majority of the state’s dispensaries — the financial benefits of rescheduling fall to relatively few businesses.
“We believe this announcement reflects increasing recognition of the distinction between regulated medical marijuana programs and illicit markets, as well as continued federal alignment with structured state-regulated medical frameworks,” said Davis.
Email Jonah Meadows at jonah.meadows@theadvocate.com.
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