A question for licensed US cultivators about taxes

YardG

YardG

Well-Known Member
Hello, I know I should be asking a taxpro about this, and not "the internet" but I reckoned there might be some licensed US cultivators on here who might be able to answer something for me...

I had always thought legal cannabis businesses couldn't deduct business expenses from their federal (and in many cases state) taxes, because duh illegal on the federal level, but I was looking up the particulars of my state and came across a JSTOR (a database of academic journals) article about how the costs of producing the product you sell may be deductible, i.e. the expenses incurred in actually cultivating the flower may be deductible.

Anyone have any insights on that? Can cultivators take deductions for growing-related business expenses out of their business' income for tax purposes? I would have to declare the income regardless, so being able to deduct expenses for grow media etc would be very nice.
 
BarnBuster

BarnBuster

Virtually Unknown Member
My advice would be to buy a couple hours of time with a CPA who specializes in both Federal and State tax law as it applies to cannabis
businesses and specifically the impact that IRS §280E has in your state. Ideally you could have a firm that has both a CPA and/or Tax Atty who are experienced in that field. Good Luck

Edit: from the March 2022 article below:
"Because Massachusetts generally follows the trade or business deductions provided by the Internal Revenue Code, businesses engaged in marijuana-related activities may not deduct trade or business expenses for Massachusetts business tax purposes either." but: "marijuana businesses may deduct the cost of goods sold." Hence the need for all the legal/tax help, bb

Marijuana Retail Taxes FAQs

Massachusetts voters passed a ballot initiative in November, 2016 legalizing adult use marijuana in the state. As of July 1, 2018, the Massachusetts Department of Revenue will collect tax on the sale of adult use marijuana by licensed facilities.
www.mass.gov www.mass.gov
.
 
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YardG

YardG

Well-Known Member
BarnBuster said:
My advice would be to buy a couple hours of time with a CPA who specializes in both Federal and State tax law as it applies to cannabis
businesses and specifically the impact that IRS §280E has in your state. Ideally you could have a firm that has both a CPA and/or Tax Atty who are experienced in that field. Good Luck
Click to expand...
Thanks! I'll do that before I actually deduct anything, although I am finding more online from pretty reputable sources that seems to support that certain expenses aren't subject to 280E (i.e. COGS) and are deductible (though many others are not). I'm in an emerging market which might make finding someone experienced a bit difficult, but I suppose the small # of med operations that exist must've figured this out and everyone who jumps into the legal market is going to be in a similar boat-of-confusion.

Frankly I was presuming nothing would be deductible, the idea that some expenses might be is heartening on its own.
 
Boatguy

Boatguy

Well-Known Member
YardG said:
Hello, I know I should be asking a taxpro about this, and not "the internet" but I reckoned there might be some licensed US cultivators on here who might be able to answer something for me...

I had always thought legal cannabis businesses couldn't deduct business expenses from their federal (and in many cases state) taxes, because duh illegal on the federal level, but I was looking up the particulars of my state and came across a JSTOR (a database of academic journals) article about how the costs of producing the product you sell may be deductible, i.e. the expenses incurred in actually cultivating the flower may be deductible.

Anyone have any insights on that? Can cultivators take deductions for growing-related business expenses out of their business' income for tax purposes? I would have to declare the income regardless, so being able to deduct expenses for grow media etc would be very nice.
Click to expand...
Staying off the feds radar should be rule number 1.
The IRS is an understaffed agency, but if you get flagged its game over.
 
BarnBuster

BarnBuster

Virtually Unknown Member
YardG said:
...finding someone experienced a bit difficult..
Click to expand...
A quick search and I see several people who specialize. I'm sure there are some in Boston, the big firms are not going to let a new opportunity
for addtional revenue fall by the wayside.
www.aafcpa.com

Dave McManus, CPA, CGMA - AAFCPAs Co-Managing Partner

Dave leads AAFCPAs’ Commercial Tax Practice and the firm’s Cannabis Business Practice, providing highly coveted tax and business advisory solutions.
www.aafcpa.com www.aafcpa.com

Cannabis – Prince Lobel Tye LLP

princelobel.com princelobel.com
www.seyfarth.com

Cannabis

Cannabis Law Practice
www.seyfarth.com www.seyfarth.com
 
YardG

YardG

Well-Known Member
Thanks!

I knew there was at least one law firm in my state that specializes in the cannabis-industry, sure enough there's a CPA firm as well. Ugh there's a lot I'd have to get on top of if I want to ever be able to take any deductions.
 
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