No matter how you may personally feel about marijuana if you are an accountant you may already have a client who is in the medical marijuana industry. Or you may soon be approached by someone who sells marijuana legally. The fact is 22 US states have made medical marijuana legal. In this article from Marijuana Business Magazine written by John Schoyer, the accounting needs of those in the medical marijuana industry are discussed in great detail. The article is titled, Industry Snapshot: Accounting Services for Marijuana Businesses.
One important takeaway from the article is that there is a high demand for professional CPAs and accountants in the medical marijuana industry. Here is a quote from the article, "Marijuana retailers in particular face huge tax burdens because they can’t take the types of standard deductions mainstream businesses can claim. That’s where certified public accountants and financial firms come in. Experts in complicated tax law – including section 280E of the federal tax code – are in high demand in the marijuana industry as companies look for ways to minimize what they owe to the federal government. They’re also critical for businesses that want to abide by the law and maximize profits.
“I’d like to see more CPAs get involved, rather than somebody who is maybe not as well trained in these issues,” said Dean Guske, the founder of Guske & Company, a Washington state accounting firm that serves more than 350 cannabis-related clients."
This is great news for accountants and others in the financial sector if you aren't squeamish about handling a marijuana client. But there are hurdles to overcome if you have a client in this industry. Another takeaway from the article in Marijuana Business Magazine is the following statement concerning those hurdles, "Perhaps the most common problem for cannabis CPAs is the oft-lamented 280E. In some cases, accounting professionals simply can’t help certain companies minimize the impact of the tax provision. In other cases, they can’t help clients enough to the point where they’re satisfied.
“I’ve had to turn people away and say, ‘You really have to change this business model,’” Zamarra said, referring to cannabis businesses structured in a way that makes it tougher for them to take tax deductions. “But most of the time we can plan around 280E if they come to me early.”
A parallel hurdle is the lack of access to banking. Marijuana businesses that are forced to do business entirely or mostly in cash often wind up using poor accounting and bookkeeping practices, which can lead to headaches for CPAs like Marty when it comes to filing tax returns and getting a company’s records in order."
We suggest that if you are an accountant who is considering taking on a client in the marijuana industry, you take a few minutes to read the article we have referred to in this post from Marijuana Business Magazine. Also, do more homework if you need to so that you will be able to confidently handle the accounting of this very different type of client.
Another way to be confident in your accounting abilities and to assure that you are using the most effective tools available, check out the PDF Financial File Converters offered by MoneyThumb. We hope all of our Rules of Thumb blog readers have a wonderful weekend.