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Oregon Marijuana Dispensary Owner First to be Sentenced on Federal Tax Charges

rawpixel-1055781-unsplash Accounting Today January/February 2017 The Trusted Professional 26 U.S. Code 280E recently, a tax court ruled against

The Tax Court also addressed the couple’s claims for costs of good sold, noting that “costs of goods sold is a reduction made in the course of computing gross income. … It is not a deduction, and therefore it is not disallowed by Section 280E.” But the Tax Court found that there was no information on the record to calculate inventory during the relevant years, nor for the cost of goods sold, so it disallowed the couple’s reductions claims that were in excess of the amounts that the IRS conceded in its brief.

The industry also faces numerous banking challenges, which can exacerbate the tax challenges. Many banks won't deal with marijuana industry customers, as doing so requires extensive paperwork that most institutions believe isn't worth it. On top of this, the Federal Reserve does not let marijuana businesses access its system, and the Federal Deposit Insurance Corp. refuses to insure their accounts. This, in turn, forces the industry to rely more on cash, which necessitates other expenses such as armed guards and armored cars. Accounting Today noted that the heavy use of cash, in and of itself, increases the likelihood of a tax audit. 

These sorts of business issues, and many more, will be the subject of discussion at the NYSSCPA's upcoming Cannabis Industry Conference, which is scheduled for Dec. 11 in New York City. You can register for the conference at this page.