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Knowledge & Insights

Cannabis Tax Return: Expert Advice for Compliance


Do you really need a CPA for tax preparation and filing your tax returns?

The simple answer is yes, you do need a trained and experienced cannabis CPA for tax preparation and filing your cannabis business’ state and federal tax returns. No, there is no law or regulation that requires this, we just highly recommend using a cannabis industry certified public accountant to assist with tax planning, tax preparation, and tax filing. Using an industry professional for this service is vital to ensure that your cannabis operation is compliant and running smoothly. There are many different tax codes and nuances that are cannabis specific–like 280-E–that require an extensive background to understand what they fully mean for you and your business. It is important not to miss this in the early stages of your business, or else you risk failure.

Why are cannabis taxes tricky to deal with? Why can an expert help? (audits, tax compliant, state vs federal)

Cannabis taxes can be tricky to comprehend due to the complex nature of the industry. We are operating in an industry that is not recognized as ‘legal’ by the United States Federal Government. So, it is left to the legalized states to implement certain laws, regulations, and tax codes for cannabis businesses. GreenGrowth CPAs can help prepare your business for an audit by organizing and preparing the required documents necessary to show an external auditor, if it were to happen. We prepare your company’s quarterly and annual taxes for the state and federal government, as well as help with audit support.

What are the advantages of choosing a CPA to file your tax returns? (Specific tax return details for cannabis businesses)

cannabis tax returnQuite simply, if you calculate cannabis sales tax incorrectly (which a majority of operators do), then you will most likely have an auditor at your door getting ready to sift through ALL of your reports and paperwork. This is no joke. Choosing a CPA in the cannabis industry to file your state and federal tax returns will inhibit anything like this from happening. Although you can still be audited, you will be prepared and ready to show the auditors correct documentation. CPAs don’t miss any details. They follow a step by step procedure to ensure that your books are organized and correctly reflect the operations of your company.

Why choose GreenGrowth CPAs?

GreenGrowth CPAs has saved our clients over $1.5 million dollars in taxes. Combined, our tax experts and CPAs have over 100 years of experience with preparing and filing taxes. Here is a story from one of our team members, Natalie Rasmussen, EA, Tax Senior Manager, who saved a client tens of thousands of dollars in taxes due to a simple calculation error and the introduction of the CARES Act in 2020.

2020 was a year of mid legislation that required every cannabis operator to have individual licenses. As a CPA firm, we are responsible for continuing education every year and staying up to date with the current legislation and any financial changes that come our way. We have a responsibility to do our due diligence and keep track of every changing tax rules and regulations throughout the year.

Tax brackets are always changing, and there are different limits because inflation is ever changing. During the COVID-19 pandemic, the CARES Act was passed in March of 2020. GreenGrowth has a responsibility to help cannabis businesses when tax rules like this change.

Natalie reviewed the CARES Act and understood exactly what it meant. She was then able to apply this knowledge to the tax returns for one of our clients.

Once the CARES Act came through, it changed the same tax rule that was in place for 30-50 years. For example, say you have a warehouse and you build out this warehouse to suit your company. You will use special lights, walls, and filtration systems that cost a significant amount of money. Say XYZ company spent $200,000 retrofitting this warehouse. This update can be classified as a leasehold improvement. Natalie was able to help her client take the $200,000 and spread this cost out over a 15 year term. Instead of filing taxes for the $200,000, the company now gets a $15K deduction every year until the total is used up.

GreenGrowth CPAs stays up to date with current and on the fly legislation. We are always scanning updates and current legislation, we are looking at case laws, and we are up to date on all new legislation to fit our client’s needs.

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