Cannabis Knowledge & Insights

3 Best Tax Software Tools for Cannabis Companies

The right tax software tool can help you organize your tax return, but double check all the information before you file.

  • We strongly recommend you speak to a CPA before you file your taxes, as the IRS is notorious for auditing cannabis operators. 
  • Xero, Quickbooks Online, and Freshbooks are all good options for getting started with your taxes. 
  • Double check your return to make sure there are no deductions prohibited by the 280e.

Speak to one of our experts to get help filing your taxes. 

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Continuing our previous coverage of the best POS systems for cannabis companies and our general software recommendations, this guide gives you our picks for the three best tax software tools for cannabis operators.

Of course, we strongly recommend working with a CPA firm that knows the ins and outs of cannabis regulations – especially when it comes to finding deductions that aren’t prohibited by the 280E.

If you do choose to use one of these tax tools, make sure to have someone with CPA experience check your return before you file; the IRS has been extremely aggressive in auditing cannabis companies.

Xero

Xero’s accounting software was one of our top recommendations for cannabis companies looking for a user friendly, cannabis friendly, cloud-based system.

We like Xero’s automated banking tool that reconciles expenses and provides a tracking system for businesses with multiple locations. With over 600 integrations for CRM, point-of-sale, time tracking, e-commerce and more, you can customize the features you need for your business.

In particular, Xero’s tax modules deliver key functions that help you come tax season:

  • Automatic sales tax calculation: this allows you to enter the sales tax rate for your state by changing the default settings. From there, the platform automatically calculates the sales tax for each transaction.
  • Integrations with sales tax software: Xero will sync with tools like Avalara and TrustFile, two sales tax tools that can file sales tax returns and stay compliant.
  • Ease of filing tax returns: Xero links with the IRS website, making all tax forms easily accessible. You can also share your consolidated tax statements directly with your accountant.
  • Streamlined interface: Xero’s user-friendly dashboard makes filing tax returns straightforward, reducing the amount of help needed from an accountant.

Xero is a great option for cannabis operators who are worried about applying the right sales tax rates. Learn more about their tax capabilities here.

QuickBooks Online

QuickBooks by Intuit is favored by small businesses in every industry, and it’s clear why. This tool features a dashboard dedicated to tax management, which cannabis operators can use to file taxes, manage sales tax, and automate tax deductions on a quarterly basis.

Here are some other great tax features in this accounting tool:

  • Automatic tax deduction: for those possible deductions not prohibited by the 280e, you can flag business expenses automatically into the correct deduction category to make filing your return easier.
  • Tax management for self-employed individuals: sole proprietors can use a QuickBooks package to export Schedule C directly into TurboTax.
  • Quarterly tax management: manage your federal tax burden throughout the year by letting QuickBooks set up quarterly tax calculations.
  • Flexible, mobile capabilities: QuickBooks Online is cloud-based, making it easy for cannabis operators to file their taxes from anywhere while on-the-go.
  • Easy set-up: like Xero, Quickbooks is pretty easy to set up and start using without any prior accounting or tax knowledge.

If you are self-employed or a sole proprietor, QuickBooks Online might be the best tool for you. Read more about QuickBooks Online’s tax deductions tool here.

FreshBooks

FreshBooks is another go-to tax option for cannabis operators looking for a full-stack solution. Not only can small business owners e-file their taxes, but FreshBooks also lets you manage online expenses, payments, invoices and projections.

It has similar sales tax capability to Xero, as well as these other key tax features:

  • Sales tax rate: set a custom sales tax rate for different tax categories of sales transactions.
  • Sync with other tax tools: FreshBooks integrates with other tax platforms, such as Avalara TrustFile, to help expand your tax management tool kit.
  • Generate tax reports: to help file your taxes more efficiently, FreshBooks can generate a report of all your financial transactions – profit and loss, payments, and expenses – in one report.
  • Mobile tax app: Freshbooks’ mobile app helps you track tax reports on the go.
  • Great customer service: this tool gets high ratings for great customer service. FreshBooks’ support team is known for being very helpful when it comes to resolving tax-related technical issues.

Learn more about FreshBooks’ tax support integrations by clicking here.

Not sure which tool is right for your cannabis business?

Our experts can help.

We’ve provided expertise to dozens of cannabis companies filing their taxes and know what deductions you can take advantage of. Click the “Get Started” button below and meet with our team.

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