All cannabis-related businesses are heavily regulated; make sure you have a professional, knowledgeable accounting partner.
Protect Your Cannabis Business
If you have a cannabis business—perhaps you are a dispensary or a grower, or maybe a business that works with delivery or processing the product—you need a professional CPA who understands the unique financial challenges of the cannabis industry.
Dope Consulting can provide substantial value by offering our knowledge and guidance. Not only do we help with managing cash flow and common payroll issues, but we will also keep your cannabis business compliant with state and federal tax laws.
One such tax law that applies to cannabis businesses is Section 280E.
Dope Consulting provides professional financial reporting support for cannabis businesses, including dispensaries, delivery, processors, and growers/producers.
Section 280E Plays a Large Role In Cannabis-Related Business Taxes
The IRS has determined that state-compliant commercial cannabis businesses are federally illegal. Section 280E of the tax code states that companies that handle controlled substances can’t deduct any expenses incurred in their production, distribution, or sale—as opposed to companies that operate in legal industries that can deduct the majority of their business expenses.
The problem for businesses like yours is that because of Section 280E, most costs associated with doing business in the commercial cannabis industry are not deductible, and companies find themselves paying taxes on gross profits and not net income. The intended result is a much higher tax bill that makes the businesses of many growers and distributors unprofitable.
This is because the exception to the law is costs of goods sold (COGS) are deductible. This includes the seeds, soil, nutrients, and water expenses related to the cultivation and harvesting of the actual plants. Expenses that are not deductible include shipping, rent, and other overhead costs not directly related to production.
The challenge is deciding what is and what is not connected with the direct output of the product and how this term can be interpreted and applied. This can create a significant disparity in taxes owed by a cannabis business, which means a business’s best choice is a professional accounting firm that knows the difference.
Dope Consulting Will Make Sure Your Cannabis Business Stays Compliant
A professional accountant is an indispensable asset to a business that works with cannabis. As a business owner, you need to make sure all your financial matters are being handled in a correct and professional manner. This is especially true if your business is even remotely associated with cannabis or hemp as state, federal, and even local laws can widely vary and contradict each other. The laws surrounding a substance that is illegal in many respects has to be handled with care to prevent any surprises.
The best defense against federal tax laws like Section 280E is to work with the dedicated team of accountants at Dope Consulting. Our firm focuses on providing compliant accounting practices for both hemp and marijuana businesses. We have helped hundreds of companies navigate the complex and sometimes contradictory laws and regulations in the hemp and cannabis industries.