Operating a marijuana dispensary, while legal in a handful of states, is technically illegal on a federal level. Because of this, local laws and regulations pertaining to retailer/dispensary business tax planning may lack clarity. Businesses that sell cannabis, hemp, or CBD products are closely monitored by the government, underscoring the importance of accurate retailer/dispensary business tax planning.
One reason many states have legalized the use of medical and recreational marijuana is that the government wants to earn tax money from it. Entrepreneurs looking to operate a dispensary selling hemp, cannabis, and CBD products are working in one of the most regulated industries in the country and should rely heavily on their retailer/dispensary business CPA to avoid finding themselves out of compliance with state tax laws, which could lead to their dispensary being shut down.
Can Marijuana Dispensaries Qualify for Tax Deductions?
Marijuana dispensaries may receive tax deductions on the Cost of Goods Sold. Since marijuana dispensaries are technically illegal on the federal level, a retailer/dispensary business CPA could not include deductions for advertising and marketing, as other legal businesses can.
However, materials, production costs, or delivering the product, and employee salaries can all be recorded as deductions on a dispensary's retailer/dispensary business bookkeeping. The retailer/dispensary business accountant could also include the facility the dispensary operates out of and the space used for sorting, packing, and handing out cannabis, hemp, or CBD related products.
It is imperative that a retailer/dispensary business accountant is meticulous about entering all receipts and transactions in their client's retailer/dispensary business bookkeeping. This is because the laws around the sale of hemp, cannabis, and CBD products are constantly changing. Something that was not deductible last year might soon become deductible. At Fusion CPA we have a team of retailer/dispensary business financial advisers who monitor changes to tax laws connected to the sale of cannabis, CBD products, and hemp. We stand ready to help you.
State Taxes and Marijuana
Each state that has legalized the sale of marijuana has created unique taxation requirements.
• Alaska has no sales tax, so it may be easy to open a dispensary selling cannabis, CBD, or hemp products. The only requirement is that the farmer who sells the marijuana must pay the state $50 for every ounce of cannabis they sell to the dispensary. These expenses are generally passed on to the clients.
• California has more comprehensive state tax laws for the sale of hemp, cannabis, and CBD products. Growers have to pay a product tax of $9.25 per ounce for marijuana buds and $2.75 for leaves. Dispensaries collect a 15 percent excise tax and a 7.25 percent state sales tax on every item customers purchase.
• Maine puts the bulk of the taxation requirements on the cultivators, requiring them to pay a 21.5 percent excise tax on all marijuana they sell to dispensaries and processors.
• Oregon doesn’t have a sales tax. However, they have created a special sales tax of 17 percent for cannabis, hemp, or CBD products.
• Washington has the highest tax on marijuana, coming in at 37 percent on transactions between dispensaries and customers.
The list above just summarizes a few of the tax laws in a couple of states. It barely scratches the surface.
Help in Navigating Cannabis Tax and Accounting
Fusion CPA offers retailer/dispensary business CFO business advisory to businesses in the marijuana industry. Our knowledge of the recreational and medical marijuana industry allows us to assist in improving your bottom line and make your accounting processes more efficient.
In order to help you navigate the murky waters of cannabis business tax planning and accounting, our team offer to help create CPA attested financial statements, monthly and quarterly financials, and state and federal tax preparation. Our cash flow management, strategic business planning, and budgeting/forecasting services mat give you the tools you need to get your dispensary off the ground and keep it growing. Are you in the planning stages of opening your first dispensary? Do you have an established dispensary and want suggestions on how to grow? If so, our team is here to help you. You can learn more about our services by clicking the button below to schedule a complimentary discovery call today!
This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.