For all of the excitement, opportunity and money surrounding the emerging national and international cannabis markets in 2018, there could not be a more confusing accounting and tax environment for starting a new business. The continued prohibition at the federal level makes even the simplest business transactions complicated. From opening and maintaining a bank account, accepting payment from customers, to running a basic payroll, everything requires extra time and research to find vendors and partners willing to work with cannabis companies.
At the federal taxation level the 280E restrictions on the deductibility of ordinary business expenses creates a highly unfavorable business tax environment. Attorneys and CPAs have come up with a slate of strategies designed to mitigate these effects, but the industry is too young to have had any of these strategies battle tested in tax court. With national legalization looming with an uncertain realization date and potentially lengthy adoption period, a tax strategy that can be sustainable for the next several years in the current environment is a must.
In the cannabis industry, your tax and accounting partner is an essential piece of your long term strategy. Good accounting is like insurance for tax risk, and no industry faces higher tax risk than cannabis. If your accounting transactions don’t follow the path laid out by your tax strategy the whole structure can fall apart like a house of cards. At GPL we provide both the long term strategies to mitigate the unfavorable effects of 280E and the accounting training and oversight to make sure your books reflect the adopted strategy.