Navigating the financial complexities of cannabis dispensaries requires expertise beyond traditional accounting. Cannabis accounting experts come equipped with deep knowledge of industry-specific regulations, including the nuances of IRC Section 280E and varying state tax codes. 280e states that cannabis businesses cannot deduct any expenses from the production, distribution, or sale of marijuana on their taxes. Dispensaries are only able to deduct their Cost of Goods Sold, which mostly dispensary accounting includes the price of the products they sell.
Specific cannabis accounting services we offer:
2) Ready to service your existing Cannabis and/or CBD/hemp accounting client? We help you understand how to provide world-class service, as well as give you the downloadable tools that you can use immediately on day one to serve these clients. Everything from properly on-boarding your Cannabis/CBD/hemp client, setting up a perpetual data room, month-end tie-outs, day-to-day bookkeeping, etc. This program is meant to be DIY and plug and play, so you can go through the different modules at your own pace. Our hope is that you’ll be proficient in providing Cannabis and CBD/hemp accounting services within 90 days, which is totally possible if you invest on average at least an hour a day into learning and implementing the materials.
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On the one hand, that limits the tax benefits dispensaries can expect from the IRS compared to other businesses. On the other hand, despite the Schedule I classification, dispensaries have to report and pay taxes on their income from cannabis sales. Cannabis businesses also need to pay employment taxes like other businesses. Preparing for them, you can set your dispensary up for success as the cannabis market blooms. Here are 10 common accounting challenges cannabis business owners experience — and how a cannabis accountant can solve them.
Your Trusted Tax Advocates
The National Association of Cannabis Accounting and Tax Professionals is here to support you on this journey. • National Association of Cannabis—Offers a complete guide on the day-to-day accounting requirements of working with cannabis companies for bookkeepers and accountants. This opens you up to specialized business opportunities in industries that require detailed financial reporting on business expenses due to intense governmental regulations. However, medical marijuana accounting can have additional complexities due to its involvement with the medical industry and insurance of qualifying patients. There are differences between recreational and medical marijuana that will have a major impact on how you conduct business and do your dispensary bookkeeping. Unfortunately, cannabis accounting platform software designed to assist this complicated process is still lacking and doesn’t work well with widely used accounting systems.
- This includes doing weekly cycle counts and reconciling to POS and seed to sale systems.
- They are specifically not part of a Cost of Goods Sold expense because they do not contribute to the making of or purchasing of inventory.
- With careful inventory management, cash controls, and cannabis-friendly accounting tools, cannabis CPA professionals can help dispensaries navigate the complex world of cannabis finance and minimize their tax liabilities.
- Tax preparers are charged with assimilating data into a properly filed tax return, based on the information given them.
- Implementing strong accounting practices helps accurately track allowable cannabis business expenses.
- Now that we discussed the challenges, let’s head over to what’s cannabis cost accounting.
Serving the legal Cannabis Community
Our CPA experts are just a phone Suspense Account call away, offering clear, timely support whenever you need expert accounting guidance. Develop and document a process to determine total cost of goods sold and follow it strictly. Ensure all inventory is on your balance sheet at the end of each reporting period. In other words, it is best practice to enter all vendor invoices into QuickBooks upon receipt, regardless of whether the invoice is paid via cash, check or credit card.
GST/HST and provincial sales tax
Our bookkeeping methods align with the latest IRS guidelines and cannabis-specific https://www.bookstime.com/ accounting standards. State regulatory agencies often require dispensaries to submit financial records to prove compliance. Inaccurate or incomplete books can trigger an investigation or jeopardize your operating license. Keeping your records audit-ready at all times is key to maintaining a strong, legal operation. Overall, we recommend hiring a professional bookkeeper to lead your dispensary’s finances. An accountant who specializes in the cannabis industry can keep track of your inventory and expenses with ease, hopefully saving you money at tax time.