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We're on the edge of a new era... CannaBusiness
The majority of entrepreneurs who have chosen to work in Cannabis-related businesses have done so because they believe in the power of the plant to heal people, maybe even society as a whole. You have chosen to pursue a career path that is fraught with real danger, because you believe that sick people should have safe access to quality medicine. There are certainly easier ways to make a living, that’s for sure! I am inspired by your conviction, and want to help you bring about a world where you can pursue your mission without fear of arrest or asset forfeiture.
Obviously, the greatest risk you face is that of criminal arrest and prosecution, even when you are in full compliance with all local and state laws. Yes, the ruling in USA v Marin Alliance for Medical Marijuana and Lynette Shaw should have stopped DEA actions against state-compliant Cannabis businesses, but the raids of Med-West in San Diego and more recently Absolute Xtracts and Care by Design in Sonoma County highlight the uncertainty surrounding even the most compliant Cannabis businesses.
Another huge issue for the Cannabis industry is the lack of access to the federal banking system. From the security issues of simply handling so much cash to the administrative issues of having to pay all your bills in cash, not being able to use a regular bank or accept credit cards creates significant operational challenges.
As if all that weren’t enough, you are then denied tax deductions for all your expenses except Cost of Goods Sold. This effectively makes your tax rates roughly twice as high as any other business!
Kudos to you for choosing to be a part of the cultural transformation where societal acceptance and safe access are the norm. We are on the cusp of just such a world, thanks to the personal sacrifice of many brave individuals. Unfortunately we are not there yet, and until we are, it is in your best interest to minimize your risks wherever possible.
One thing we can all be sure of is that any business openly working in this industry will surely face increased scrutiny from all levels of government. Working with an accounting firm that is experienced in the issues you face, and whose philosophy is aligned with your own, is an important component of any Cannabusiness’ successful survival.
280E is no joke, and until such time as it no longer applies to your industry, working with an accountant that possesses a solid understanding of full absorption inventory costing is vital to your ability to profitably and safely run your business. Applying the 471 regs to your business operations requires an in-depth understanding not only of the regs and what may be deducted as COGS, but also of the specifics of your operation. Don’t settle for any old accountant, make sure the one you’re working with really knows the unique rules specific to this industry and how to apply them.
The information contained in this post was accurate at the time it was written. It is also general in nature and is not to be relied upon for any compliance decisions you may or may not make. There is no substitute for both hiring a qualified professional to advise you as well as doing your own research to validate the advice you are receiving. You may not rely on this posting in substitution for your own decision-making. Every situation is unique
Note – Wonder why this page only references Cannabis and never marijuana? Marijuana or marihuana as a term has a derogatory history, while Cannabis is both more accurate and more respectful.