In recent times, the cannabis industry has gotten a boost with many countries legalizing the use of the plant. In the US, the trade is still illegal at the federal level but many states have approved the substance for medicinal and purposes at least.
This has left many cannabis firms in no man’s land on how to put accounts in order.
While these companies might have gotten the nod they seek for their operations in many states, they still have to remain within the ambit of the laws of the country to avoid any stiff penalties.
Like every business, a cannabis company has a lot on its plate. From farming the cannabis crop and producing chemicals on a large scale to retail and the production of food, the business can be a handful.
This makes it important to delineate the task of ensuring the accuracy of the figures to certified public accountants.
At SmartCPA, we have seasoned CPAs who are willing to put in the work to ensure the relevant laws are obeyed including the code 280E of the Internal Revenue laws and 471 tax codes.
The cannabis industry remains a highly regulated one in the country, and an audit could be requested of your firm at any time.
Hiring an accounting firm with a deep understanding of the possible grey areas and how to deliver a clean bill of health to your company, especially when it happens out of the blue, would be a big help to the continued survival of your enterprise.
Below are some of the many ways SmartCPA could help your cannabis business:
Exploring the tax deduction minefield
While section 280E of the IRS tax code does not allow certain deductions to businesses that traffic illegal substances, cannabis companies (though legal in some states) have been affected by this law.
Since federal laws haven’t recognized the legality of cannabis, these companies can’t deduct any administrative and sales expenses. This means the business bears the brunt of running costs without enjoying any deductions like every other business.
To ensure the flourishing of your business despite the turbulent federal laws, we would proffer channels were this stifling overhead costs can be relieved without burdening the final consumers with astronomical prices.
Every time the IRS calls, we answer
Due to the absence of federal legislation backing the cannabis industry, the IRS often sees cannabis companies as guinea pigs for their numerous audits. And your establishment can’t afford to ignore such audit requests nor fail them.
For us at SmartCPA, we have the experience and knowledge of the workings of the cannabis industry and the IRS to ensure you survive every audit the government’s tax agency throws your company’s way.
Funding and the money laundering connection
With the illegality caused by the existing federal laws, banking services are considered out of bounds to cannabis businesses.
When an industry is known for cash transactions, it’s easy for people involved in money laundering to ply their trade. This could put a reputable cannabis enterprise at risk with the relevant security agencies.
If you choose to work with the CPAs at SmartCPA, we will ask questions to confirm the legality of the funds received.
This is in your best interest as our client.
We are committed to your growth and wouldn’t want you to run contrary to the existing laws of the country.
When push comes to shove and your cannabis company requires the input of legal practitioners who are familiar with the tax codes, we are always willing to help.
SmartCPA isn’t just constrained to helping you with the numbers; we are committed to the growth of your establishment even if it means pursuing a case at the tax court.
With section 280 E of the Internal Revenue code exerting its effect on your cannabis business, you want to maximize profit without breaking the law. Obviously, you need to have a tax plan to get around this legal obstacle.
While that section is strict about zero tax deductions on running costs like payroll, and other business expenses, your cannabis farms can still take advantage of the goods and services sold window.
Invariably, by growing your cannabis yourself, all the running cost involved can be taken care of through that window and a seasoned certified public accountant can document this accordingly.
While the IRS handles tax collection on behalf of the federal government, the state governments collect taxes as well. Cultivation tax, and excise tax are payable to the relevant state tax authorities, so you will need an impressive tax plan to ensure all these are sorted out without problems.
SmartCPA has the capacity to handle the creation of an adequate tax plan which will keep the IRS in check and ensure you can run your business without any form of intimidation.
Due to the limitations of the relevant federal laws, your cannabis trade is expected to be a cash-only business. No bank would touch you. This makes your business a haven for hoodlums.
Bringing a knowledgeable certified public accountant into the picture ensures every cash movement is tracked accurately keeping criminal elements at bay without breaking any laws.
With the numerous regulations on the cannabis industry, your business structure has to be very sound if you are to make a profit.
More people are making an entry into the industry, and competition will get stiff in the coming days.
Breaking up the enterprise into several businesses is important if you want to make headway. You can’t allow the section 280E Internal Code to hold the entire business down.
Separating the growing of crops from the retail outlet means you save more through the cost of goods and services sold clause.
SmartCPA has the professionals ready to brainstorm and offer solutions to the numerous challenges lying in wait along the path to the growth of your business.