IRS Answers Questions About Taxation of Cannabis Companies

The IRS has released guidance specific to the cannabis industry in the form of an FAQ and a dedicated Marijuana Industry page.

Much of the guidance confirms the tax obligations and ineligibility of cannabis companies for federal tax deductions under Section 280E. It also reminds taxpayers of an effective tax mitigation strategy that maximizes the deduction of cost of goods sold (COGS).

Other highlights of the guidance include:

  • Payment plans and other options available to marijuana companies to pay outstanding taxes over time.
  • Penalties and additions on adjustments made during an income tax audit.
  • Best practices for documenting and reporting cash payments over $10,000 in a single or related transaction(s).

Grassi’s Cannabis Advisory Group will continue to keep you updated on the latest IRS guidance and related pronouncements from state taxing authorities. Contact your Grassi advisor or John Pellitteri, Cannabis Practice Leader, to learn more about how this guidance affects your cannabis business.

Robert M. Bernstein Robert Bernstein is a partner at Grassi and leader of the firm’s Automotive practice. He specializes in providing business advisory and tax services to professionals within the automotive industry. His clientele includes owners of new and used car dealerships, full-service and exterior-only car washes, quick lube stations, auto repair businesses, independent and franchise gasoline stations and related convenience stores. Robert got his start in... Read full bio

John V. Pellitteri John V. Pellitteri is a Partner at Grassi and leads the firm's Healthcare and Cannabis Service Practices. Possessing over 30 years of experience in accounting, auditing, tax planning and business consulting, John is now applying his talent to the burgeoning cannabis industry. John possesses comprehensive accounting and taxation knowledge, which combined with his healthcare consulting experience, allows him to provide an all-inclusive assessment of... Read full bio

Categories: Advisory