Just a decade ago the concept of a “marijuana tax attorney” would be unthinkable. Today, with things changing so dramatically and rapidly many dispensary owners and cannabis professionals are wondering how to meet their tax obligation in good faith… without paying more than is necessary. The current tax landscape with pitfalls around every corner make the need for a cannabis tax attorney all but essential. If you’re involved in the cannabis industry, it’s crucial that you speak with a cannabis tax lawyer on a regular basis to ensure you’re following the guidelines set forth by the law, both state and federal, while also protecting your interests and minimizing your obligations.
Without further ado, here are 3 big reasons why you need to pick up the phone and call a cannabis tax attorney at Abajian Law to keep your business and assets protected from punitive action by the government.
It’s no secret that federal resources have come down hard on dispensaries who don’t carefully follow the letter of the law. If you’re involved in the cannabis business in California, congratulations! You’re part of a new chapter of innovation and entrepreneurism in this country’s history. However, an unfortunate side effect of being on the forefront of change is dealing with an ever-shifting legal landscape and increased liability due to the fact that cannabis remains illegal at the federal level. This begs the question: how do dispensaries pay taxes?
The answer is: “very carefully.” Marijuana tax problems can range from improperly (or fraudulently) prepared returns, simple overpayments or inefficient business structuring, all the way to serious action taken by the federal government to penalize you. Although the state of California provides some resources to help you make sense of cannabis tax laws, the information is incredibly dense and may not provide immediate relief or a sense of confidence when you’re trying to complete your cannabis tax returns. Instead of trying to delve through the thousands of pages of information provided by the state, consider turning that burden over to a qualified and knowledgeable cannabis tax lawyer who can do that work on your behalf.
When it comes time to pay cannabis tax in California, you’re probably tempted by a certain section of the tax code: Section 280E. Simply put, this is a section that restricts cannabis-based businesses from taking advantage of the perfectly common tax deductions that are used by businesses in virtually every other industry. The result is an effective tax rate that hits marijuana business owners hard in the wallet.
Here’s where things get tricky: there’s some limited precedent to suggest that some deductions can actually be made, if they relate to the “cost of goods sold” which are separate from the marijuana-centric portion of the business. This is an extremely tricky area that should not be navigated by anyone other than a tax attorney, unless you’re comfortable risking your entire business and personal finances on a new and unsolidified area of law (as it applies to this new industry).
If you’re interested in figuring out how Section 280E might apply to your cannabis business, do not try to answer that question yourself. You need the help of a veteran cannabis tax attorney to help you make sense of this section as it relates to your specific business.
If you’re concerned about cannabis tax issues stemming from your business, that’s good. Being proactive about your taxes and finances when you’re involved in the cannabis industry in California is simply prudent.
You might be surprised to discover that retaining a cannabis tax attorney to represent and protect your business is less expensive than you think. And when you factor in the liability limitation (and legal obligation minimization) that a capable attorney can bring to the table, the legal services essentially pay for themselves.
You should be commended for starting or managing a cannabis business in California in the 21st century. However, despite cannabis seemingly being in the mainstream culture in some parts of the state, don’t become complacent and forget that it is still a federally illegal substance that requires extremely adept legal maneuvering to properly meet and optimize its associated tax requirements.