October’s Women Grow Networking Event – Cannabis Accounting 101
ACCOUNTANT SHARES VIEWS ON
“TAX PLANNING FOR YOUR MARIJUANA BUSINESS”
Ann Arbor, MI, October 20, 2015—What expenses can medical marijuana-related businesses legally deduct? How can they pay taxes if it is federally illegal? How can they even claim income?
These were some of the questions discussed by CPA James Campbell, of Numbers Professional Accounting Services in Royal Oak, with members of Women Grow at their monthly meeting at Bloom City Club in Ann Arbor on Thursday October 1.
In a talk focused mainly on the needs of caregivers, he acknowledged how confusing taxes are. “Businesses want to pay taxes but they don’t know how to claim income or what to deduct, or if they will be arrested. Banks want to do business with you but it is still federally illegal.”
And so the industry is still largely cash-based “until you are forced to come out of the shadows because you want to report income so you can buy big-ticket items like cars and homes.”
The fact that a business is cash-based raises more red flags for the IRS than does the fact that the business involves marijuana because the IRS assumes that cash-based businesses understate revenue and overstate expenses. How do you counter those assumptions?
- Keep complete, consistent records.
- Save receipts.
- Do not claim non-deductibles.
He acknowledged the risks of reporting and the penalties of trying to be legitimate, pointing to Section 280E of the federal tax code, a punitive provision that prohibits deductions for expenses that most businesses take for granted. As a result of this section, legitimate cannabis industry businesses in Colorado, for example, are paying taxes on up to 70 percent of gross income because 30 percent or more of their ordinary business expenses that should be deductible are not. Ordinary business expenses include anything that is not included in cost of goods sold, such as advertising, rent, and all other overhead and sales activities related to the cannabis product.
He urged business owners to know the law, know their business, keep records, and think defensively. “Don’t be intimated by the IRS—but don’t ignore the IRS.”
Additional important tips:
- Don’t get advice from public forums.
- Don’t get tax advice from the dude at your grow shop.
- Don’t get bogged down in details.
- Pay your taxes.
Women Grow, founded in 2014 in Denver, Colorado, is a for-profit entity that serves as a catalyst for women to influence and succeed in the cannabis industry as the end of marijuana prohibition occurs on a national scale. Women Grow monthly Signature Networking events connect aspiring and current professionals in the cannabis industry. www.womengrow.com. For more information about the Ann Arbor Chapter, contact Dori Edwards, Ann Arbor Chapter co-chair at firstname.lastname@example.org.
Bloom City Club, sponsor of the monthly Women Grow meetings, is a cannabis education and provisioning center. It is an organization of successful professional business women dedicated to providing the highest-quality medical cannabis, outstanding customer service, and the most valuable information to its registered medical patients. For more information, contact Colleen Tracy, General Manager, email@example.com, (734) 585 0621, www.bloomcityclub.com.
Next month’s speaker will be Robin Schneider who is the Legislative Liaison for the National Patients’ Rights Association (NPRA). She is an expert and insider on the current legislation being passed through the MI House and Senate. Find out how these new laws, if passed, will affect you! It’s sure to be a fascinating and informative presentation with a great opportunity for Q&A.
The NPRA advocates at a local, state, and national level to protect medical marijuana patient and provider rights. Robin served in the Michigan House of Representatives Medical Marihuana Task Force and has spent the last five years advocating for safe access to all forms of medical cannabis, including pediatric use. Robin is the mother of four children and has helped parents of sick children to craft and introduce medical marijuana legislation across the nation. She was recently named one of the nation’s most influential women of weed by Skunk magazine. For more information on the NPRA visit www.nprausa.com.
Ken Wachsberger is an author, editor, political organizer, and member of the National Writers Union.