10 Tax Tips for Cannabis Investors and Entrepreneurs

10 TAX CONSIDERATIONS FOR CANNABIS INVESTORS AND ENTERPRENEURS

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The cannabis industry faces some specific tax rules both on federal and state levels.  Most entrepreneurs are interested to know which expenses they can deduct from their business federal income tax.  Under normal circumstances, a business can deduct all its usual and ordinary business expenses incurred in the same year.  When it comes to the marijuana industry, things are a bit more complicated.

No Expenses Deduction Allowed: IRC Section 280E

In terms of this section, no one is allowed to deduct expenses incurred to secure income from the trafficking in controlled substances.

Yes, this means that if you are a smuggler, you have to declare your smuggling income, but you are not allowed to deduct any of the expenses you incurred while securing your illicit income.

Under federal law, marijuana is still a controlled substance, and as such, hence a marijuana business is still considered an illegal business operation. However, it is not this simple either.

Cost of Sales is Allowed to Be Deducted

Under Section 1.61-3(a) the costs of goods sold is not a deduction. The cost of goods sold is deemed to be a reduction in gross income.  Despite IRS 280E then, the costs of the goods sold in the legal marijuana industry can be “reduced” against total sales income as long as consistent methods used by the vendor determines the costs of goods sold.

Business Growth Strategy 

Business growth is the ultimate strategy to sustain your company operations. The key to achieve this objective is to link every element from your strategic plan to the creation of revenue. Linking your plan, strategy and tactics to sales will save you time and money and will make easy the management of your business. There are a few set points for the business cycle that you can anticipate and increase the chance of success of your business.

Offshore Strategies

The objective of a offshore strategy is confidentiality and the protection of your assets from frivolous claims. The typical offshore plan starts with an offshore company and goes even to the application for becoming an offshore bank. This may be a fundamental piece of your international strategy enabling the placement of wealth outside of the country without the risk of government freeze and confiscation. The benefits of an well crafted offshore strategy include, in addition to confidentiality and asset protection, zero corporate tax,  flexible business laws and protection from political and economic changes.

  • Offshore Companies. 
  • Offshore Bank Account. 
  • Offshore Banking Licensing. 

Audit and Assurance Services

Your audit is an opportunity to assess the reliability of information your partners and investors use to make important decisions about funding, lending and expansion:

  • Audits
  • reviews
  • compilations of financial statements

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