Tax Planning & Compliance
We work directly with our clients to provide cannabis tax services that help you remain compliant with all tax codes and rules in the highly regulated cannabis industry. This is vital, as it mitigates your risk of incurring legal fees, facing IRS audits, or being shut down.
Tax Planning & Compliance Services
Tax Return Preparation
Cannabis tax laws can be complex and confusing. Our team handles your tax filing with in-depth knowledge of the latest cannabis tax codes and customized strategies to reduce your tax burden and maximize your return.
Sales Tax, Excise Tax, and Use Tax Assistance
Not only are cannabis tax laws complicated; cannabis sales and use tax rates are far from straightforward — in part because they vary dramatically from state to state. What’s more, some states add an excise tax (defined by the IRS as “taxes that are imposed on various goods, services and activities”) on top of state sales taxes. And local towns and counties may impose an extra 1% to 3% tax on top of that. Depending on your volume of revenue, our team assists you with all taxes on a monthly, quarterly, or annual basis to ensure you remain compliant. Also, the excise tax documentation we provide can help you claim a refund for your losses in cases of theft or robbery, which are common in the cannabis industry.
Business Entity Selection and Structure Planning
What’s the best entity structure for your cannabis business? It depends. At CJBS, we work with your attorney to evaluate the business legal structure best suited to your needs and growth. Setting up the right type of cannabis business entity is the first and most important step in establishing your business and will help determine your tax structure, asset protection, and how equity will be dispersed when investors come on board, among other things.
Expense and Cost of Goods Sold Optimization
To help you mitigate the risks associated with an Internal Revenue Code (IRC) Section 280E audit, we make sure to align your internal records with your allocation of costs during tax preparation. Educating you and ensuring you have proper recordkeeping of your cost of goods sold (COGS) helps you be in control of your financial records and identify deductible costs to limit your tax liability.
IRC Section 280E
This decades-old federal statute remains a big challenge for cannabis operators today, as it limits companies’ ability to deduct typical business expenses from their federal taxes or claim certain tax credits. We leverage our extensive industry experience and deep knowledge of cannabis tax laws to ensure you remain compliant and can focus on growth.
IRC Section 471
This complex but important tax provision deals with business inventory and determines a cannabis taxpayer’s ability to deduct the cost of goods sold (COGS), which is normally disallowed under Section 280E. As industry experts, we understand exactly how to consistently and properly use section 471 to calculate cannabis COGS — a key factor in determining your total deductions. Because the more deductions you have, the smaller your tax bill will be.
Cannabis Tax Planning and Compliance FAQs
What are the chances my cannabis business will face an IRS audit?
You should always be prepared to be audited; it’s a main reason we help our clients maintain impeccable records. Over 16 percent of cannabis small businesses are audited, compared to just 1 percent in other industries.
How can I legally maximize my deductions?
It’s important to work with an expert who understands the nuances of section 280E and has extensive industry experience. Your cannabis accountant should also Understand the different approaches for calculating your cost of goods sold (COGS) and know whether you are required to use 471 or can use 263a. Finally, ensuring you have the right ownership structure for your company and the possibility of creating multiple entities so that not all are subject to 280E is vital.
Where can I learn about the latest cannabis tax compliance regulations?
Contact us today to schedule a consultation. We’d be happy to discuss current cannabis tax regulations, as well as which ones are most likely to affect your business.