Maryland cannabis dispensary owners face unique tax burdens and accounting challenges. From 280E limitations to complex excise taxes and cash-heavy operations, your financial reporting practices can make or break your business.
In this blog, we’ll walk through how to manage your taxes and reporting requirements so you can stay compliant with Maryland law, reduce audit risk, and make smart financial decisions.
1. Understand Your Federal Tax Burden (IRC 280E)
Even though your dispensary is legal in Maryland, it’s still classified as a Schedule I drug operation under federal law. That means IRC Section 280E applies, preventing you from deducting normal business expenses such as:
- Rent
- Marketing
- Utilities
- Payroll (outside of COGS)
You can only deduct cost of goods sold (COGS), which makes proper accounting essential. Failure to follow these rules can result in IRS penalties and overpaid taxes.
2. Know Maryland’s State Cannabis Tax Rules
As of 2024, Maryland cannabis dispensaries are subject to:
- 9% retail sales tax on adult-use cannabis
- 6% retail sales tax on medical cannabis
- Local business personal property tax
- Standard employer tax obligations (withholding, unemployment, etc.)
You must register with the Comptroller of Maryland and file regular sales tax returns. Be sure to properly distinguish between medical and adult-use sales on your reports.
3. Establish Accurate Chart of Accounts
A compliant chart of accounts is your foundation for accurate tax reporting. Your accounts should:
- Separate COGS from non-deductible expenses
- Track income by product type (flower, edibles, vapes)
- Allocate costs to departments (retail, compliance, admin)
- Isolate taxes collected vs. owed
This level of detail is not only helpful for tax planning—it’s often required during audits or licensing renewals.
4. Prepare for Cash-Handling Challenges
Many Maryland dispensaries still operate partially or fully in cash due to limited banking access. This creates additional reporting and audit risks.
Best practices include:
- Daily cash reconciliation and vault logs
- Secure cash transport to safes or banks
- Dual-employee verification during handling
- Weekly review by finance personnel or outsourced CFOs
Proper documentation is essential to defend your numbers if questioned by regulators or tax agencies.
5. Perform Monthly Financial Reporting and Reconciliation
Stay ahead of compliance issues by closing your books monthly. Your reports should include:
- Profit & Loss Statement (by department or product line)
- Balance Sheet
- Sales tax summary and liability report
- Inventory reconciliation to seed-to-sale system
- Payroll and 280E-adjusted net income
Consistent monthly reporting will also help you spot financial trends and plan for quarterly or annual tax payments.
6. Get Ahead of Audits and Licensing Reviews
The Maryland Cannabis Administration or state tax authorities may audit your business at any time. Be prepared by keeping:
- Three years of financial records
- Sales tax returns and payment confirmations
- Payroll and employment tax filings
- Bank statements and deposit logs
- Copies of POS and seed-to-sale inventory exports
Audits are less painful when your records are clean, current, and consistent.
💰 Final Thoughts: Don’t Let Taxes Drain Your Bottom Line
Maryland cannabis businesses operate in one of the most complex tax environments in the country. From federal restrictions to state tax rules and cash handling risks, your dispensary can’t afford sloppy financials.
GreenGrowth CPAs specializes in cannabis accounting, tax strategy, and CFO services. We help Maryland dispensary owners manage their 280E exposure, stay compliant with state filings, and generate clear financial reports that support confident business decisions.
