Tax Planning For Cannabis Companies

Expert Tax Planning for Cannabis Companies

Meeting Cannabis Corporate Tax Planning Needs

Cannabis CPA goes beyond tax prep and filing. We help you meet your financial and business goals while staying compliant with the complex tax and general business regulations faced by companies in your industry. In fact, we want to partner with you in all the financial aspects of your operation or, in other words, we’re here to create a joint business endeavor that helps you grow and succeed.  

Toward that end, our large and small cannabis business tax planning services are focused not solely on taxes, but also on a range of tasks that include tax prep and planning. We help cannabis firms set up their business structures — that is, choosing whether to operate as a sole proprietorship, C-Corporation, S-Corporation or an LLC on the basis of taxation considerations. Then, because typical business deductions are not allowed for controlled substances, we set up the business’s accounting and bookkeeping systems in a way that captures expenses included in cost of goods sold (COGS), which are allowed.  

In a recent update, U.S. Code § 471 now allows cannabis companies to reduce the impact of U.S. Code § 280E by allowing businesses with a three-year average of under $25M in gross receipts to calculate COGS for taxes in the same way it calculates COGS for financial accounting. This means that more expenses are acceptable as COGS, which lessens the taxable income for cannabis companies. We thoroughly understand § 471 and we will determine if you should take advantage of this provision by weighing the benefits and risks of using this regulation vs. § 280E.

Our Cannabis Business Tax Planning Services

We provide the following as part of our tax planning for cannabis companies:

  • Balance sheet
  • Income statement
  • Cash flow projections
  • Income tax projections
  • Budgeting
  • Cash flow analysis

Recent Changes to Laws Affecting Your Tax Prep

There were several developments within the past year that could have a significant effect on your tax filings in the immediate future. For example, the Inflation Reduction Act was passed in 2022, which changed some of the energy credits that were previously available. Specifically, electricity produced from renewable resources now may have greater impact on your filing once the law takes full effect in 2023.

A less positive change, took the form of the Infrastructure and Investment Jobs Act of 2021 (IIJA). This included the retroactive termination of the Employee Retention Credit. The elimination of this deduction was expected to have a significant impact on how cannabis companies’ tax returns would look going forward. In addition, the IIJA also tightened reporting requirements for businesses that report cryptocurrency transactions.

Why Choose Cannabis CPA for Your Cannabis Business

At Cannabis CPA, working together and planning ahead are our goals. After a thorough evaluation of your company and current tax situation, we suggest ways to help you save some green when tax time rolls around. From structuring your company to optimizing your record keeping, we’re here to ensure you stay in compliance without paying more in taxes than required. Trust Cannabis CPA for proactive, year-round tax planning services.