We are industry experts in the taxation of the medicinal cannabis industry.
As your partner in medicinal cannabis tax and business needs, we work with cultivators and dispensaries throughout the U.S. We guide cannabis clients in navigating the complex world of IRC Sec 280E and to secure the lucrative Research and Development tax credits to minimize federal and state income taxes and surcharges.
We are experienced in working with all types of organizations that provide legal recreational cannabis, medical marijuana, hemp farming, and ancillary services. We regularly partner with law firms and tax attorneys to defend our clients against the taxing authorities. We specialize in the implementation and of tax saving strategies relating to Strategic Consulting, including business plan & sales strategy development. We specialize in corporate and individual income tax planning and preparation; we also provide litigation support and expert witness services.
R & D TAX CREDIT
Tax saving benefits to utilizing the Research and Development tax credit; often overlooked as a tax saving strategy in the cannabis industry.
Especially relevant to Cultivators, we can guide organizations through the maze of rules and regulations regarding this technical tax savings strategy.
Costs included in the COGS for both cannabis cultivators and dispensaries
Cannabis Cultivators can include the following costs in the COGS including direct material costs (marijuana seeds and plants), direct labor costs (planting, cultivating, harvesting, sorting) and indirect production costs to the extent, and only to the extent, such costs are incident to and necessary for production or manufacturing operations or processes. There are nine other costs and expenses that cannabis cultivators can deduct, including... Further, if a marijuana-production business produces financial statements in accordance with GAAP (no cash basis or tax basis), under the 1982 version of Regs. Sec. 1.471-11(c)(2)(iii), inventory can also include additional costs to the extent that they are properly allocated to inventory for GAAP purposes, including....
Cannabis dispensaries must follow a 2015 memorandum that states: “A marijuana reseller using an inventory method would have capitalized to inventory the invoice price of the marijuana purchased, less trade or other discounts, plus transportation or other necessary charges incurred in acquiring possession of the marijuana”. Based on this, we can include in the COGS Invoice price of the marijuana purchased, net of trade or other discounts. The dispensaries should buy prepacked products. The cost of the package would be part of the invoice price and would be deductible. If the dispensaries prepackage the products for selling, then the prepacking costs are not deductible. Transportation to the dispensary is deductible as are other costs necessary to gain the possession of the inventory.
CPAMD can help you with other tax saving strategies to help reduce the punitive and unfair impact of this outdated code section.