Tax and accounting issues you should not ignore when setting up your cannabis business:
The Trouble With Cash-Based Businesses
- Internal Controls – any cash-based business is closely scrutinized by the IRS and other taxing authorities. Having robust internal control procedures, in writing, which are strictly enforced, will go a long way in establishing credibility with taxing authorities.
- Form 8300 requirements – educate yourself or hire an accountant who can work with you to comply with this filing requirement.
- Bank Secrecy Act – take precautions to avoid violations
Find Good Help
- Hiring reputable Certified Public Accountants (CPA) and legal counsel to assist you in operating your business is very important.
- CPAs often do not have guidance from their licensing boards regarding representation of marijuana businesses and many are therefore reluctant to offer advice.
- Many large law firms are still reluctant to assist marijuana businesses despite actions by numerous state bar associations to assure attorneys they will not be violating state ethics rules when representing businesses in the legalized marijuana industry.
- However, sophisticated advisers are starting to work with the industry, both in-house and as external advisers.
Comply, Comply, Comply
- Abide by Internal Revenue Code section 280E – this requires knowledgeable and diligent accounting advice.
- Be ready for an audit and for dealing with very aggressive revenue agents. Even though federal law enforcement in many cases is easing up on enforcement under CSA, the IRS has not adopted that view – marijuana businesses have a huge target on their back and the IRS is holding marijuana businesses to a very high standard.
- Be timely and fully pay your taxes – tax liens can create issues with licensing authorities.