Bowers & Company CPAs has formed a Cannabis and Hemp Niche to help new and existing businesses understand the complicated and growing Cannabis industry.
“The Cannabis industry is unique and is really three different industries all in one: Agriculture, Distribution, and Retail,” said Nick Agrippino, CPA, who is spearheading the niche at Bowers and Company CPAs. “Bowers has experience in all these industries. Plus, we have had the pleasure of working with some of the only ten medical license holders currently in New York State.”
Agrippino said the firm recognizes a need for professional accountants and consultants in the cannabis industry. If the Marijuana Regulation and Taxation Act (MRTA) successfully achieves its social equity goals, this need becomes even more pressing.
“New business owners will need assistance navigating the complex regulations to be set,” he said. “Our professionals can help business owners navigate tax implications, industry regulations, and operating procedures.”
Most experts believe New York State may be among the most lucrative cannabis markets in the United States. The state comptroller estimates it to be a $3.1 billion industry due to New York’s population, wealth and culture. Agrippino agrees that this will be good for New York State as a whole.
“New York has an opportunity to regulate a market that already exists and create jobs and opportunities for those impacted the most by the war on drugs,” Agrippino said. “Though many individuals have valid concerns of the impact legalization will have on our community, the fact of the matter is most of these concerns are already happening every day – synthetically produced knockoff products, driving while intoxicated, underage use, just to name a few. By legalizing and regulating an already existing market, New York can address these existing issues while generating tax revenue.”
How Bowers Can Help Cannabis Businesses
Since the sale of cannabis remains illegal at the federal level, businesses cannot take certain deductions or credits when filing taxes. A section of the US Tax Code known as IRC Section 280E allows the US Government to treat cannabis businesses differently than other businesses. It is particularly unfriendly to cannabis businesses as the drug is still listed as a Schedule I substance federally. Because of this, cannabis businesses can expect to pay a higher marginal tax rate due to tax law disallowing certain tax credits and deductions available to other businesses.
This type of business must also understand the regulatory framework of sales and excise taxes at the state level. Take the excise tax collected by licensed distributors as an example. This tax is based on a per-milligram of THC measurement, so accurate tracking is imperative. To add more complexity, it also varies by product type. Underpayment penalties for sales and excise taxes are not friendly. Businesses must be 100% audit-ready.
“Bowers is ready to serve Cannabis businesses of all sizes. Our firm strives to understand everything about industries we are involved in, which makes us stand out,” Agrippino said. “We routinely take on new challenges when clients have a new need – like the PPP program and Employee Retention credit. The Cannabis industry is no different, and businesses will need unique one-time services during the licensing process.”
Bowers Serves as Your Business Partner
Bowers is prepared to provide counsel and support to existing cannabis businesses and start-ups in tax planning, licensing, operating procedures, general business consulting, and more. Services include everything from complete bookkeeping services to general consulting engagements for licensing.
“With the Cannabis industry being as complex as it is, it is super important an advisor/consultant understands exactly what a business does. If they don’t, that means an advisor is just going through the motions and not helping businesses succeed,” Agrippino said. “Bowers is not just an advisor or consultant – we are business partners.”
Bowers & Company CPAs aims to offer helpful information to our clients and friends. Learn more about how we can help should your business need accounting and financial services.
Disclaimer: To ensure compliance with requirements imposed by the Department of Treasury, we inform you any U.S. federal tax advice contained in this document or video is not intended for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document.