Why some cannabis license holders don’t succeed?

Recently, the Arkansas Medical Marijuana Commission voted to reject the sale of two medical marijuana dispensary licenses. This decision by the Arkansas Medical Marijuana Commission seemed to send a clear signal to licensee holders within the “Natural State”, on how they’d like to see the licensees used.

From what we gather, it seems that these license holders weren’t making significant progress towards opening their doors for business.

Which is interesting because people tend to think that the cannabis industry is the equivalent of the modern-day California “gold-rush.”

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4 Tips For Getting a Bank Account For Your Cannabis Business

Here are four tips that can help your cannabis business get and keep a bank account for your business

Getting a bank account remains to be one of the most challenging aspects of running a cannabis business, despite being legal on a state level in a growing number of places.

As of July 2019, there were roughly 630 banks and credit unions serving the U.S. marijuana industry.

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What to Look for When Choosing Your Cannabis Accountant

Your cannabis business is only as strong as the team that supports it

One of the key things your cannabis business needs to survive is a strong team of professionals and advisors on which you can rely. Think of it, like choosing an insurance plan, where the network your physician belongs to plays a major role in the care that you receive. When you select your cannabis accountant, it should be no different, make sure your professionals network is a source of strength. Our CPAs here at Cannabis Culture CPA, are members of a nation-wide network consisting of cannabis attorneys, financial institutions, and other industry advisors, so you can be sure that the challenges you face get answered by the best. Continue reading

Tax Reform and how it affects your Cannabis business

Your Cannabis business and U.S. Tax Reform Questions Answered

During a recent call with a client, I was asked a question from a cannabis entrepreneur on whether the new tax reform rules would affect his business. He wondered if the tax breaks in the Tax Cut and Jobs Act's (TCJA) would apply to him and his canna-business.

And although it was a great question about Section 199A and the 20% business deduction available to small businesses, the short answer was no. 

The Problem:

Cannabis businesses won’t be able to take the 199A deduction, but some of the other tax reform changes may work in favor of cannabis businesses if appropriately planned.

The Solution:

Although cannabis businesses won't be able to take the 20% business deduction there are other changes that could be of some benefit

What’s Section 199A, and why can't cannabis business take advantage of it?

Section 199A allows certain businesses to deduct 20% of its qualified business income. Because of the tax laws preventing business involved in selling the schedule 1 drugs, these deductions aren't able for cannabis businesses.

Section 280E of the IRC is the reason why cannabis businesses won’t be able to benefit from the Section 199A deduction.

At its core, as long as cannabis is considered a Schedule I or II substance, Section 280E significantly limits the deductions and credits that a cannabis business can take.

The limitations on what's involved in the cost of goods sold calculations for most cannabis business models, and the exclusion of the Section 199A deduction will continue to cause the cannabis businesses to have a higher effective tax rate compared to non-cannabis companies.

And although the IRS’s regulations and court guidance are silent regarding the Tax Cuts and Jobs Act’s treatment of cannabis businesses, it’ll be safe to assume that cannabis businesses won’t receive the 199A deduction unless the courts say otherwise.

Which tax reform changes should a cannabis business consider?

While cannabis businesses may not be able to take advantage of the Section 199A deduction, they may be able to benefit from the changes to how C corporations are taxed. With the tax reform changes, C Corporations are taxed at a flat rate of 21%, which makes the C Corporation an attractive entity for a cannabis business. If you are in a tax bracket greater than 24 percent and operate a cannabis business, you should strongly consider the C Corporation as your entity of choice.

Selecting a C Corporation for your cannabis business makes sense from a pure numbers perspective, but as always, you should have your CPA run the numbers for your specific situation. Be sure to compare all the available entity choices that meet your business model.


If you have questions, contact us and we’d be glad to provide you with a sanity check

1. Take the quiz

Spend less than 5 minutes answering 10 questions about your organization's business model and it's cannabis tax and accounting strategy.

2. See how you scored

You will immediately see your overall score, which measures your business's chances of overpaying its cannabis taxes compared to your peer organizations.

3. Get your free report

Register for your personalized report and a complimentary cannabis business review with our CPAs to get a deeper look at your results.

2019 Edition – Answers to your Tax Reform Questions

For most small businesses and the self-employed, the 20 percent tax deduction from new tax code Section 199A is the most valuable deduction to come out of the Tax Cuts and Jobs Act.

The Section 199A tax deduction is complicated, and many questions remain unanswered even after the IRS issued its proposed regulations on the provision. And to further complicate matters, there’s also a lot of misinformation out there about Section 199A.

Below are answers to five common questions about this new 199A tax deduction

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2018 Last Minute Business Vechicle Planning Tax Tips

It’s time to examine your existing cars, SUVs, trucks, and vans for some profitable year-end business tax deductions.

Your first step is to identify your gain or loss on sale. Once you have the gain or loss, know these basic rules:

  • Gains attributable to depreciation produce ordinary income.
  • Gains in excess of original basis produce capital gains. (This is unlikely to happen on most business vehicles, but it can happen with classic and antique business vehicles because they can go up in value.)
  • Losses on business vehicles produce ordinary deductions.

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