By Jonpaul Taylor
In a filing from acting Solicitor General Elizabeth Prelogar on May 24, 2021, the Department of Justice confirmed that the federal government intends to continue classifying legal cannabis businesses as operating in the sale of illicit drugs, thus subjecting them to 280E under the current tax code. Those familiar with the cannabis industry are familiar with the way 280E eliminates most of the tax write-offs available to traditional businesses. Though cannabis companies have continued to battle with the federal government over cannabis’ inclusion under 280E, the courts have continued to side with the federal government on this issue.
Considering that 280E will continue to affect cannabusinesses for the near future, we at Medbook want to reiterate the importance of proper day-to-day accounting in the cannabis space. Proper, exhaustive bookkeeping is currently the only way to mitigate tax liability under 280E, as it allows for the most accurate determination of COGS. It is important to coordinate with your CPA and day-to-day accountant so that the items your CPA intends to deduct can be recorded properly throughout the year, along with creating the proper accounting controls so that no deductions are missed.
If you’d like to learn more about the importance of proper day-to-day accounting in the cannabis space or would like to learn more about what Medbook Solutions can do to service your daily accounting needs, contact us through the form below.
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