Over 28 million small businesses are operating in America right now, according to the U.S. Small Business Administration.
And there are about 1.23 million accountants.
Do you think every accountant knows every business? Of course not.
Accountants have specialties, just like most service-based industries. If you run a cannabis business, you need an accountant who is an expert in the cannabis industry.
Cannabis is one of the most complicated industries in the world. While 25 states and the District of Columbia have legalized some form of marijuana, it remains a Schedule I drug. That means the U.S. federal government considers your business illegal.
This makes banking, accounting, and taxes a challenging game for cannabis businesses.
The most important rule of this game is staying compliant. The more you can stay compliant with your local state laws, the less you worry about being penalized.
One key to staying compliant is working with an accountant who is familiar with the industry, stays updated on changes to local regulations, and has successfully worked with other cannabis businesses.
Here are a few things you want to remember when hiring an accountant. Make sure they are knowledgeable in the following areas:
Cannabis-specific tax advice.
There really isn’t a one size fits all solution to filing taxes for your cannabis business. You need an accountant who can review your operation and advise you on best practices.
Allowable cannabis business deductions.
Accountants who have experience in the cannabis industry have learned through trial and error what deductions you can safely take. Internal Revenue Code Section 280E does not allow businesses to deduct ordinary business expenses from gross income earned through “trafficking” Schedule I or II substances, as defined by the Controlled Substances Act.
State compliance.
Follow your state laws with laser-like precision. You don’t want to create any reason for your business to be flagged. This can be challenging because state laws are constantly evolving. This is why you need a knowledgeable accountant who will stay up to date on the laws that impact your business.
Take heart. The cannabis industry is moving in the right direction. The conflict between state and federal law is just a growing pain. Choose an accountant wisely, and your business will be better positioned to grow and thrive.
For even more on cannabis taxes and how to hack through filing, read up on all things cannabis taxes here.
