Due to the application of Section 280E, you may also face increased operational costs, struggle to set competitive consumer prices or offer good salaries to your employees, and have trouble keeping your business afloat. At the federal level, selling cannabis can be viewed as “trafficking” because marijuana is still considered a Schedule I controlled substance (a potential reclassification is on the horizon, but it hasn’t happened yet). Such errors need to be located and addressed to ensure the integrity of inventory amounts, data hygiene, and the accuracy of that data going forward. For income summary the Cannabis cultivator to remain compliant, seed-to-sale software needs to have inventory amounts inputted into the system along with logs of every person who touched any plant during any stage of its development.

Skyline Bookkeeping, LLC

Use your primary accounting system as the general ledger only for sales, cost of sales and inventory. Knowing what items are allowed to be part of COGS for dispensaries is THE major hurdle to having proper and accurate accounting. Only inventory purchases and shipping for inventory to your dispensary are allowed as COGS items for Dispensaries. Many operators finished 2018 with high hopes, only to discover the tax bill that awaited them was unlike anything they anticipated!

California Cannabis CPA

Your reports should accurately capture your revenue from cannabis sales, ancillary products, and wholesale transactions. With a chart of accounts tailored to the needs of your medical marijuana business, you can streamline financial record-keeping, enhance reporting accuracy, and ensure compliance with regulatory requirements. The medical marijuana industry operates in a complex regulatory and legal landscape. From federal illegality and the harsh 280E tax to strict tracing and reporting requirements, cannabis businesses face many unique challenges.

Streamline inventory management

Cloud-based solutions offer better security and automatic backup features, ensuring your critical data remains safe and accessible. Once the Magic Envelope reaches the scanning facility, the team at Shoeboxed will scan, data-verify, and upload the receipts to your Shoeboxed account under the 15 tax categories. With the Magic Envelope, cannabis companies can outsource their receipt scanning to Shoeboxed. With Shoeboxed’s user-friendly mobile app and web dashboard, you and your employees can scan receipts on the go or manage expenses via desktop. With all of the government regulations put in place, bookkeeping for dispensaries is a cumbersome process. Last but not least, Zoho Books is our pick for an array of accounting features and an emphasis on tax compliance.

• For example, you can create specific accounts for cultivation, costs, retail sales, product manufacturing, regulatory fees, and compliance expenses.
• Cannabis businesses have to follow stringent IRS-imposed guidelines to stay afloat.
• The breaking points in the cases that have gone to trial have largely come down to poor record-keeping.
• In order to get started, fill out our short discovery form by clicking the link below.
• These are some of the important factors medical marijuana accounting can provide businesses.

Hannah DeMoss is a staff writer for Shoeboxed covering organization and digitization tips for small business owners. Her law firm chart of accounts favorite organization hack is labeling everything in her kitchen cabinets, and she can’t live without her mini label maker machine. As a result, you can operate more efficiently, streamline processes, and make better decisions.

The Canna Accountants & Tax Professionals, LLC

Periodically, ask your staff accountant for the “balance sheet by class” and “profit and loss by class” reports. If your accounting team is following this tip, there will be no “unclassified” columns on the reports. If there are, remind your team that every transaction needs to be classified properly. If your marijuana medical marijuana accounting business is already generating sales, you are likely using an accounting system geared toward smaller businesses such as QuickBooks. Moreover, partnering with a medical marijuana accountant like Puff Puff Accounting brings peace of mind.

• Tax preparers are charged with assimilating data into a properly filed tax return, based on the information given them.
• Compliance with legal and regulatory requirements is an important part of accounting since there are many tax laws to pass through.
• Use your primary accounting system as the general ledger only for sales, cost of sales and inventory.
• All cannabis business owners who want to thrive in this highly regulated industry must go over the state-specific sets of laws and regulations that govern their operations, including accounting tasks.
• A skilled medical marijuana accountant understands the nuances of tax codes, financial reporting, and regulatory compliance unique to this evolving sector.

Proper accounting procedures, combined with secure cash handling practices, are paramount for both financial accuracy and safety. With various products and strains, dispensaries must have a robust system to track sales accurately. This involves understanding the price points, discounts, and promotions, ensuring that revenues are correctly reported. Once the cannabis crop transitions from the farm to the dispensary, a new set of accounting challenges emerges. Dispensaries, being the final point of sale, have their own financial intricacies that require specialized attention. Specializing in cannabis accounting, we understand the ins and outs of the industry, ensuring that your financial operations run smoothly and efficiently.

Federal vs. State Regulations

Then, the CEO or another member of management can review those PRs and sign off only on those they deem necessary. Because they carry valuable, in-demand inventory, dispensaries are often the victims of theft. Unannounced audits can act as a powerful deterrent that underscores the severe consequences of theft and its harmful effects.