Ah, California. A place synonymous with sunshine, redwood forests, farmland, cliff-lined beaches, Hollywood and cannabis. Since 1996 the cities of San Francisco, Los Angeles, and Oakland have served as consumer hubs for the best-in-the-world marijuana grown in the Emerald Triangle and across the state. There are large high-tech indoor grows producing strains with up to 30% THC content, small family farms cultivating organic, sun-grown flower and vertically-integrated coastal greenhouse grows bringing CBD balanced options to market.
Cannabis, unlike 99% of other industries, is new and until January 2018 there really wasn’t such a thing as cannabis accountant. There were experienced, talented accountants working with cannabis companies in legal states (medical and recreational) developing processes, creating cannabis-specific chart of accounts and staying up-to-the-minute on legal cases involving the application of 280E. There were, and still are, bookkeepers, accountants and CPA’s working with cannabis companies that don’t have the correct skills, the latest information or the right tools to keep their employers/clients compliant, audit ready and on a path to success.
🌱 Traditional non-cannabis businesses, particularly small businesses, can successfully operate with a good monthly bookkeeping service and a knowledgeable CPA. Cannabis businesses cannot. Why? IRC 280E. Local/State/Federal compliance. Lack of access to banking. That’s why it’s so concerning that many (most?) Cannabis CEO's continue to try to “get by” with a monthly bookkeeping service and a CPA firm at year-end for annual tax filings. The issue with this approach? It’s what’s missing. Everything in between!
First and foremost, having an A-team of the best professionals you can find in place is essential. The right fit is both cultural and skills -based. Every organization needs a Cannabis Attorney, Accountant and CPA to work with the executive team on compliance, regulations, tax planning, 280E and entity selection. One does not replace the other; few CPA’s do monthly accounting/reporting and an attorney should be the primary adviser on entity selection. Surround yourself with people who share your vision, have the right experience, and have the training and tools to get the job done correctly.
The California EDD (Employment Development Department) offers free training and seminars on all things employee related. They recently offered a two and a half hour seminar “Cannabis Industry State Payroll Tax” seminar in Downtown LA. The morning was enlightening, there was some great discussion among the attendees and instructor and I left with a folder full of materials on payroll tax, e-filing and misconceptions around independent contractors.