California Marijuana

It’s the time of the year when businesses of every industry prepare for tax season. For the cannabis industry, seasoned plant-touching business owners and recent licensees alike will be required to meet stringent requirements where taxes are concerned. In fact, the cannabis industry faces unique challenges not applicable to other industries—namely Internal Revenue Service Code 280E (IRC 280E), a tax code that imposes restrictions on the deductions cannabis businesses can take . IRC 280E restricts companies that sell Schedule I or Schedule II substances from deducting ordinary business expenses other than the cost of goods sold (COGS) . This means plant-touching businesses can allocate some of their operating expenses, like rent and utilities, into COGs as allowed in IRC 471. Understanding this code and organizing your accounting to comply is crucial, because the IRS has been auditing cannabis businesses actively to ensure they comply with IRC 280E. Not doing so could make your business...