Tax And Corporate Counsel For Cannabis And Cannabis-Based Businesses
Enterprises selling medicinal or recreational marijuana or cannabis products have unique regulatory and taxation issues. For starters, marijuana is considered illegal by the U.S. government — even though many states have legalized it — yet those businesses are still expected to pay federal income taxes.
The IRS has acknowledged the special considerations for the marijuana industry. New York recently greenlighted cannabis with the Marijuana Regulation And Tax Act (MRTA). California, New Jersey and other states have also enacted legislation. The knowledgeable tax law and business law attorneys of Goldburd McCone LLP can help you make sense of it all to set up your marijuana-based business, minimize your company’s tax burden and stay in compliance with state and federal laws.
We counsel cannabis growers, processors, distributors and retailers in New York, New Jersey, California and other jurisdictions nationwide. Our services cover the spectrum from proactive tax compliance and tax audit representation to guiding marijuana entrepreneurs in business formation, governance and licensing.
The IRS And The Cannabis Industry
Under Internal Revenue Code Section 280E, marijuana-based businesses are specifically precluded from federal tax deductions or credits because marijuana is prohibited under the Controlled Substances Act. That creates tax burdens and tax planning issues that other industries do not have to deal with. However, cannabis taxpayers can subtract some production-related expenses (costs of goods sold) from their gross receipts. A tax adviser is crucial for determining eligible offsets.
The IRS also recognizes that marijuana is more cash-based than other industries. Thus it provides guidance for recordkeeping, disclosing cash income, paying taxes in cash and reporting cash transactions that exceed $10,000. Our attorneys help cannabis taxpayers (businesses or individuals) adhere to IRS regulations to stay out of tax trouble.
New York Cannabis Law
As of March 31, 2021, the Marijuana Regulation And Tax Act (MRTA) legalized recreational marijuana for New York adults 21 and older and created the Office of Cannabis Management (OCM) to regulate marijuana businesses. The legislation also earmarks marijuana tax revenues for community reinvestment, support of public schools, and drug treatment and education.
The OCM created licensing requirements and restrictions for marijuana cultivators, processors and dispensaries. Current medical marijuana licensees can also participate in the recreational market. Our lawyers can help you set up your New York cannabis business and understand the tax, license and regulatory considerations.
California Cannabis Law
California’s Medicinal and Adult-Use Cannabis Regulation and Safety Act was enacted in 2017 to legalize and regulate the fast-growing market for medical and recreational marijuana. Cultivators, distributors, processors and retailers must be licensed and permitted by state or local authorities.
While the IRS does not permit deductions, cannabis businesses can deduct costs of goods sold and ordinary business expenses on their California income taxes. The tax attorneys in our Los Angeles office can assist business owners and individuals in tax compliance, regulatory compliance, and business start-up and governance.
New Jersey Cannabis Law
The Compassionate Use of Medical Marijuana Act allowed for licensing of alternative treatment centers (ATCs) to cultivate, process or dispense medicinal marijuana. The New Jersey Department of Health closely regulates this industry and requires annual renewal of permits. In early 2021, the legislature decriminalized possession of marijuana. Dispensaries will soon be licensed to sell recreational marijuana in addition to medical cannabis. The lawyers in our New Jersey office can assist those providers with taxation, licensing and business development.
We Stay Current With The Evolving Laws
As more states enact marijuana legislation or tweak their existing laws, the industry also adapts. We help clients stay compliant and take full advantage of the lucrative opportunities in this fast-growing segment.