Cannabis Tax Planning

But as with many other questions surrounding marijuana reform, the research to date provides mixed evidence, with very little research being available on the impact of recreational adult use legalization specifically. On November 7, 2023, Ohio became the 24th state to legalize adult-use cannabis with 57% of voters voting in favor of Issue 2, also known as An Act to Control and Regulate Adult Use Cannabis. If a limited liability company is organized and the entity is owned by only one owner, a single member LLC, the default tax treatment would be that the entity is disregarded for tax purposes. In other words, it would not file a separate federal income tax return, except in some states including CA, TX, TN and RI.

  • Adult-use dispensaries are likely to begin operating sometime in the summer or early fall of 2024.
  • Green Thumb Industries (GTBIF 4.02%) is one of the largest U.S. cannabis operators and one of the few that manages to turn a consistent profit; it’s been in the black each year since 2020.
  • There are several strategies that cannabis businesses can employ as part of their year-end tax planning.
  • The Missouri Independent is a nonprofit, nonpartisan news organization dedicated to relentless investigative journalism and daily reporting that sheds light on state government and its impact on the lives of Missourians.
  • Division of Cannabis Control shall issue up to 50 additional adult use dispensary licenses who have been certified as cannabis social equity and jobs program participants.

Accounting for Multiple Revenues.

The reason this is important is because Section 280e is the primary driver behind large effective tax rates – but it only applies to businesses dealing with illegal drugs. Each Greenbooks client is going to have a unique situation in terms of determining cannabis and non cannabis divisions, business activities, and expenses. One thing is for certain – this is an extremely important tax consideration and one that will likely get challenged should you ever be audited by the IRS. Let the experts guide you here – this is often done hand-in-hand with Entity Structuring though some clients come to us wondering if existing entities qualify as cannabis/non-cannabis. The page explains how court rulings have clarified that businesses must pay US federal income taxes, even if they are selling products considered illegal under state or federal law.

Cannabis Tax Planning

home grown cannabis tax planning services

As it stands, most banks won’t work with cannabis operators, barring them from accessing services essential to running a business, like opening a line of credit. Only about 10% of banks will deal with cannabis at all, and many tack on big fees to offset compliance costs. Passing the SAFER Act would mean a seismic shift in the financial operations of U.S. cannabis operators. When it comes to research focused on recreational marijuana legalization, the results are also mixed. While a 2017 study by Maclean et al. found an increase in disability claim applications and longer disability periods after recreational marijuana legalization, another study from 2021 by Abouk et al. showed reductions in workers’ compensation claims and benefits. To assess the effect of legalization on traffic fatalities in Colorado and Washington, a 2020 study by Hansen, Miller, and Weber used a synthetic control approach with data on fatal traffic accidents between 2000 and 2016.

Cannabis industry facts

Cannabis Tax Planning

Let us help you tackle your most demanding business challenges with confidence and a forward-thinking approach. We delve into how this might impact the approach to advertising expenses, offering valuable insights for every cannabis CPA. GreenGrowth CPAs carry a professional and approachable tone of voice, focusing on empowering clients with informed business decisions. Their communication style emphasizes accessibility, accuracy, and advocacy, offering a sense of security and commitment to business growth. The Electronic Federal Tax Payment System (EFTPS) is a free service provided by the U.S. This could involve buying capital items like certain types of furniture or machinery, pre-paying your rent for January in December, or even accelerating employee bonuses.

Can I grow my own marijuana?

When a cannabis company is involved in both the production and retail sale of cannabis, it needs to allocate its expenses between these two activities. To provide a valuable resource to cannabis operators within his network, Bergman started a weekly LinkedIn post in March called #TaxTipTuesday. A comprehensive round-up of tax pointers for plant-touching businesses in the cannabis industry from CJBS Senior Partner Matt Bergman, CPA. medical marijuana accounting This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship. Schedule 1 drug, many businesses do not participate in the U.S. banking system and conduct transactions in cash.

  • For example, Windle and co-authors found that marijuana legalization and decriminalization were correlated with an increase in positive cannabis tests among drivers.
  • When you work with our cannabis tax consulting firm, we’ll make sure your business takes advantage of every allowable deduction under current tax guidelines.
  • To assess the effect of legalization on traffic fatalities in Colorado and Washington, a 2020 study by Hansen, Miller, and Weber used a synthetic control approach with data on fatal traffic accidents between 2000 and 2016.
  • No company wants to constantly have to restructure their entities – this leads to a whole mess of financial and business reporting issues, recalibrating IT systems as well as different tax issues annually.
  • Reclassifying assets into different categories with shorter depreciation periods may help cannabis operators take advantage of tax benefits because they allow for greater deductions up front.

How Do Cannabis Employee-Owned Companies Avoid Tax Burden? – Forbes

How Do Cannabis Employee-Owned Companies Avoid Tax Burden?.

Posted: Tue, 02 Apr 2024 07:00:00 GMT [source]

  • Cannabis companies may face some big challenges and uncertainties when assessing QSBS eligibility or defending one’s position upon audit.
  • The page notes that although many cannabis industry businesses conduct operations with cash, these transactions must be reported like any other form of payment.
  • These business owners should always pay their taxes on time to avoid interest and penalties.
  • In its 2023 report, CEO and Chairman Ben Kovler stated he is “pleased to report that in 2023, we completed our major capex program” and that “the heavy lift [is] behind us.”
  • Statewide, consumers purchased $1.1 billion worth of marijuana in the first year of recreational use sales.
  • An additional advantage of C-corporation tax treatment may be a lower tax rate applied to taxable income.

Cannabis Tax Planning

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