A U.S. appeals court has rejected California-based Harborside’s bid to stamp out Section 280E of the Internal Revenue Code, dealing a major blow to the marijuana industry’s hopes of eliminating a federal tax provision that has cost companies countless millions of dollars over the years.

The outcome in the closely watched case means that marijuana companies will continue to be taxed by the federal government at a far higher rate than mainstream businesses – unless Congress and the Biden administration approve legislation legalizing MJ and taxing the businesses like any other industry.

Section 280E bars state-legal marijuana companies from taking standard business deductions on their federal taxes.

In a landmark ruling, a panel of the 9th Circuit Court of Appeals Thursday upheld a U.S. Tax Court ruling that Harborside owes millions of dollars in back taxes for taking business deductions and exclusions in connection with the sale of a federally illegal substance.

The case has dragged on for years, and some legal experts thought the appeal to the San Francisco-based 9th Circuit was a long shot.

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