Cannabis Business Taxes, Cannabis Tax Compliance Audits, Litigation and Collections
Cannabis Businesses face a challenging and confusing tax regime – including special state taxes, frequent and detailed audits, and Internal Revenue Code Section 280E. Cannabis Business cannot afford to gamble with their tax compliance – they are very likely to get audited and their compliance and outstanding tax liabilities will determine whether they will qualify for licensing and continued operations.
While Cannabis Businesses are legal in many states, they remain illegal under Federal Laws including the Controlled Substances Act – which labels cannabis a level I controlled substance. As a Level I controlled substance, cannabis businesses are subject to Internal Revenue Code Section 280E – which disallows deductions for ordinary and necessary business expenses but allow deductions for Cost of Goods Sold (COGS). These limitations are very important in opening and operating a cannabis business.
Cannabis Tax Compliance
A cannabis business (depending on the state) could be required to file in excess of 50 tax returns per year. Moreover, proper reporting of allowable COGS requires an understanding of state cannabis laws, the individual cannabis business, and the current legal frame work in which cannabis businesses must operate and cannabis taxes must be reported and paid. We help Cannabis Businesses understand their tax compliance requirements and properly report and pay their tax liabilities. For Cannabis Businesses with outstanding taxes or liabilities, NJRLAW can secure a collection resolution and provide that resolution to the state marijuana authorities so to secure continued licensing as a cannabis business.
Cannabis Tax Audits
The IRS has a special audit group that conducts cannabis tax audits in order to enforce compliance with IRC 280E and other tax sections. This group determines the allowable level of COGS and the tax liability that results when ordinary and necessary business expenses (if deducted) are disallowed. In Colorado, Oregon, Washington and Alaska, recreational cannabis businesses face special taxes and frequent audits. Along with the specific cannabis taxes, state tax audits typically include Sales and Use Taxes, Excise Taxes and all other taxes administered by the authority. Nick Richards is a former IRS tax attorney representing cannabis businesses involved in tax audits – California audits, Colorado audits and IRS Audits.
Cannabis Tax Litigation
In most cases, we are able to resolve a tax matter or audit without litigation or trial. But when trials are necessary, we will protect your rights and provide the strongest advocacy possible in resolving your matter. As a form IRS Trial Attorney, Mr. Richards understands and has vast experience with the IRS and the U.S. Tax Court. If you have a question about Cannabis Tax Litigation please visit our Tax Litigation page and give us a call, Nick would be happy to discuss your case.
Tax Liabilities and Cannabis Licensing
States that allow legalized cannabis sales require cannabis businesses to certify their tax compliance – failure to prove compliance can result in a suspended or revoked license. As with other tax matters, cannabis businesses and business owners face special rules and limitations when managing an outstanding tax liability. We understand these limitations and we have the experience necessary to secure a resolution and protect your valuable license. We will help insulate you from the tax authority and fight to secure a tax resolution that allows you to continue operating.