AICPA’s 2022 Conference Recognizes the Growing Need for Practiced Cannabis Accountants

AICPA Cannabis Conference 2022: Helping Stakeholders Navigate this Complex Industry

Last year was a landmark year for the Cannabis industry with the AICPA (American Institute of Certified Public Accountants) acknowledging the potential for career growth in this rapidly expanding sector.

Now, just one year later, the Cannabis industry is nowhere near finishing its climb; instead it’s expanding as more and more states get on board with legalizing Cannabis. This year there is an entire Cannabis conference dedicated to bringing together industry leaders, including a more comprehensive list of Cannabis stakeholders from CPAs, CEOS, and finance professionals to attorneys, tax advisers, farm owners, staff, and more.

The need for specially trained Cannabis experts, particularly accountants, is clearer than ever before, and the AICPA has called on DOPE CFO to help lead the charge in instructing the next wave of Cannabis accountants. This year’s three day AICPA and CIMA Cannabis...

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Cultivation Accounting and Tax for Cannabis Business Owners and Investors

If watching the pioneers in the Cannabis industry has taught us anything, it’s that getting businesses up and running and maintaining compliance has been a rocky road with plenty of tax and regulation pitfalls. It’s a lucrative industry slated for exponential growth. Experts predict the industry will breach $89 billion in the next two years – but those aren’t the only numbers that should concern new Cannabis business owners.

Along with growth in this industry comes great risk. Those in the know have seen Cannabis businesses tied up in legal issues, tax troubles, loss of licensure, and even business failures as a result of faulty, noncompliant practices. 

It’s more apparent than ever that having cultivation accounting and tax professionals who specialize in the field is a necessity. And while it’s fine to delegate the nitty-gritty to the practiced accountants, Cannabis growers, owners, and investors should still have a working knowledge of the...

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The Value Cannabis Accountants Provide for the Pre-Revenue Process

Pre-Revenue Accounting for Cannabis

In order to apply for a Cannabis business license, state and local agencies often have similar (but different) requirements and hoops that hopeful operators must jump through in order to make it through the process. The licensing process is daunting and expensive for the simple fact that states' and local jurisdictions' requirements make it so that the prospective license holders may have to shell out thousands (or even millions) of dollars, and/or be on the hook for that much in expenditures, before a license is even granted. Our Cannabis real estate blog touches on the importance of acquiring real estate before opening up shop, but real estate is just one of many steps in this process.

In this blog, we’ll describe why Cannabis CEOs and business owners should invest in an accounting expert before going through the process and cover such topics as raising capital, handling investor concerns, and setting up pre-revenue accounting systems for...

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Your Guide to Cannabis Real Estate, 280E, and Entities

Real-Estate as it Pertains to Obtaining a Cannabis License

Did you know that finding a location and going through the permitting process is one of the first things that Cannabis licensing authorities are asking for from applicants? One of the greatest challenges that Cannabis business owners face is finding a place to operate. Just because Cannabis is legal doesn’t mean that local authorities will allow operators in their jurisdiction. Then there’s zoning and dealing with the community at large to approve an incoming Cannabis business.

Keep in mind, finding an approved location happens before there is any guarantee of a license, so there is a huge amount of liability and financial entanglement involved early on. And since the licensing process can be a huge game of hurry-up-and-wait, having a strategy and utilizing an accountant that understands how 280E effects real estate, how to prepare and maintain your financials for the licensing process, and how to properly...

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The Current State of Cannabis Accounting (and How You Can Get Involved)

Where is Cannabis Accounting in 2022? 

Ever since the green wave of Cannabis started sweeping the nation, the state of bookkeeping and accounting has been changed as we know it. With more and more states legalizing both recreational and medicinal marijuana, the need for experienced accounting professionals is higher than ever.

But Cannabis Accounting isn’t as simple as one may hope. You may be familiar with some of the rules and regulations put in place from 280e and 471, but do you know the extent of legal trouble you could be putting your clients through if they’re not compliant? 

From having to pay massive fines to losing their licenses, there is a lot at stake when it comes to accounting and bookkeeping in this industry. 

In this blog, we’ll talk more about the state of Cannabis in the United States today, where it’s going in the future, and how you can assert yourself and your firm as experts in the industry.

What does Cannabis in the U.S....

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Taxation and 280E for Dispensaries

280e 471 cannabis dispensaries Feb 22, 2022

The Challenges of Accounting for Cannabis Dispensaries

From cash control issues to inadequate reporting and POS software, accounting for Cannabis dispensaries is no easy feat and making the wrong move can land your client in serious legal trouble. 

Accounting professionals claiming to have Cannabis experiences are often misinterpreting tax codes in an effort to increase deductions dispensaries may not be allowed to take. This means that the CEOs who are heavily relying on their accounting teams are unknowingly putting their company at risk of large fees, or worse, being shut down for not following the correct procedure under IRC 280E.

Professionals who are new to the Cannabis industry that have never worked with such large sums of cash are also often finding themselves in a bind by relying on accounting controls from the past that likely won’t work in this industry. The fact of the matter is that if you want to successfully keep your Cannabis clients in compliance, you...

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How Poor Bookkeeping Cost Altermeds Over $78K in Penalties

Poor Bookkeeping Cost Colorado Dispensary over $78k in Penalties

When it comes to cannabis record-keeping, not every dispensary wants to spend the fees on an accountant specific to the niche. That’s what happened to one dispensary owner in Colorado, who owes $391K in tax deficiencies and an additional $78K in accuracy-related penalties.

But how exactly did this happen?

According to the notice of deficiency for tax years 2010 and 2011, the IRS found poor record-keeping, lack of check registers, no physical inventory counts, reduction of COGS, and the denial of ordinary and necessary business expenses were more than enough to penalize the dispensary.

In Altermeds, the Tax Court upheld the imposition of a 20% tax penalty on the taxpayer for the underpayment of the tax liability resulting from the deductions taken. Various medical and recreational marijuana practices have been legalized in the majority of the states; however, the last major hurdle, the Section 280E prohibition,...

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First AICPA Cannabis Conference Paves the Future for the Industry

AICPA Cannabis Conference 2021 - The Future of Cannabis Accounting and Tax

As states across our country continue to legalize Cannabis every year, CPAs, bookkeepers, and accounting professionals are steadily encountering new clients who want to serve the Cannabis industry. The AICPA (American Institute of Certified Public Accountants} has now recognized the need for providing guidance and support to accountants who may support the quickly growing Cannabis market. 

Calling on industry leaders, the AICPA held its first 2-day Cannabis education conference, the AICPA and CIMA Cannabis Conference, on November 8 and 9, 2021 in Las Vegas, Nevada. Among the Cannabis accounting and tax leaders that presented at this conference are DOPE CFO Founder Andrew Hunzicker, CPA, along with DOPE CFO students Paula Collins, Molly Mayfield, and Carlos Vela. 

Read on for highlights of the DOPE CFO member’s presentations.

Conference Overview

The AICPA and CIMA Cannabis Conference 2021...

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Do’s and Don’ts of Cannabis Cost of Goods Sold and IRC 471-11 Accounting and Tax

Legally Reducing Tax Liability in the Face of 280E

Due to the fact that Cannabis is classified as a Schedule I drug (in spite of the fact that the majority of states in this country have voted to legalize Cannabis in some form or fashion), ALL Cannabis companies must comply with 280E. There’s little grey area here, but if you’re in the business of harvesting, producing, manufacturing, or selling Cannabis in any way, shape, or form, your business is not able to legally take deductions.

IRC 280E clearly states:

No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted. Source: Cornell Law

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Choosing the Right Cannabis or CBD Entity Structure

NOTE: When forming a legal entity it is best that all parties involved seek experienced, informed legal counsel. Preferably a tax AND corporate attorney that can help guide you in making legal decisions.  

At the inception of a Cannabis or CBD company, one of the most important first steps is to decide on the entity structure, where the client will be deciding how the business will be taxed, how equity will be dispersed when investors come on board, and how to protect the assets of owners, among other considerations. 

There are so many things to consider during this crucial stage, so if a Cannabis or CBD CEO approaches you and wants to know…

“What’s the best entity structure for my Cannabis business…?”

The answer should always be…

“It all depends.” 

Here’s why!

Questions and Considerations when Choosing a Cannabis Entity 

There are a number of factors to consider when deciding which entity structure to...

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