C 940/941, 8300 forms, Statement of Information, Form 5472, and Form 8962. Cannabis companies across the country are regularly hit with audit requests as they struggle to untangle complex tax codes. Our team of state and local cannabis tax advisors ensures that all local and state income taxes are being completed on-time and in compliance with state and federal regulations. We prepare businesses’ annual and quarterly taxes by conducting internal audits to help clients with tax preparation for the upcoming tax season. It is very important to start preparing for March 15th and April 15th NOW. Do not hold out for governmental changes, like the possibility of the MORES Act passing. Even if the MORES ACT passes, cannabis operators will still be required to file taxes in 2021 just like any other year. We prepare taxes for:
Here are some opportunities we will explore for your cannabis business:
The STATES act simultaneously brings together federal law with state cannabis laws and addresses the cannabis industry’s banking and tax issues. The Internal Revenue Code (“IRC”) tax code has certain parts regarding which businesses are permitted to take the cost of goods sold (COGS) deductions. You should be able to claim every single deduction that your cannabis business is allowed to.
For cannabis-manufacturing businesses, there are many more opportunities to claim certain items as COGS, which may include: production-related wages, rents, repairs (these items may be considered as COGS upon the sale of the inventory for accrual-basis taxpayers and instantly for cash-basis taxpayers that are cannabis-production businesses), marketing, and general business expenses remain nondeductible.
One interesting question we’ve had was around IRC 280E and deductions for cannabis businesses. “Section 280E does not, however, prohibit a participant in the marijuana industry from reducing its gross receipts by its properly calculated cost of goods sold to determine its gross income. The Internal Revenue Service takes the position that section 280E-affected taxpayers must calculate their cost of goods sold pursuant to Internal Revenue Code section 471 and the associated Treasury Regulations.”
This is reassuring news and clarifies many remaining questions about section 471. Now make sure to understand that it will depend on the cannabis vertical you operate in to determine which indirect costs can be backed into the cost of goods sold. Do you need state and local cannabis tax help? Reach out to us today!