Cannabis Accounting: What Your Clients Need to Know

Despite these challenges, opportunities for growth and professional development in cannabis accounting are substantial. As the industry continues to expand, so does the demand for specialized accounting expertise. By staying informed and adaptable, accountants can play a crucial role in guiding cannabis businesses toward sustainable success. Cannabis accounting is the specialized financial management of businesses operating in the legal marijuana industry. Unlike traditional industries, accounting for cannabis businesses is heavily regulated due to federal prohibition and state-specific laws. Accounting for marijuana dispensaries requires compliance with Section 280E, which limits tax deductions, making tax accounting for cannabis businesses more complex.

Cannabis industry facts

Financial Management is essential for creating your path to growth, while maintaining strong financial health. Your client can soon say hello to affordable banking while you smile ahead at the new realm of possibility for their future. With competitors breathing down their necks, people are hesitant to give away details on their plans. Those that have been in business before are more likely to understand why you need information to support them, but those that haven’t may need some understanding and hand-holding to help them understand why it matters. If your plans are leading you down the wrong path, we can design something new that will help you achieve your short and long-term financial goals. After all, it’s what cannabusiness think they need, even if they don’t always know what that really means.

grow your businessby choosing greenbooks

In a February 2025 press release, the agency took credit for quarantining “hundreds of thousands” of cannabis products and “a significant amount” of raw cannabis materials under 481 confidential embargo orders. Only cost of goods sold, or COGS, can be written off in the usual way (hence the need for careful receipt tracking). By accurately capturing costs year round, ensure that you’re audit-ready come tax season.

Effective Budgeting Strategies for Maximizing Cannabis Business ROI

• While tax laws surrounding the use this structure may expire, the success or failure of compliance will be helped by several factors.
• Businesses must navigate a patchwork of federal, state, and local laws, each with its own requirements and restrictions.
• The Department of Cannabis Control, meanwhile, has said for more than a year it is working with the Department of Pesticide Regulations on new pesticide screening requirements.
• However, a gradual shift in public perception and policy has led to the legalization of cannabis for medical and recreational purposes in various regions.
• A December article exposing further regulatory failures, including the open use of illegal pesticides by licensed growers, propelled a push for updated regulations.
• Navigating the complex landscape of cannabis taxation requires a deep understanding of the Internal Revenue Code280E, which governs the tax treatment of businesses involved in the sale of controlled substances, including cannabis.

Navigating the complex landscape of cannabis taxation requires a deep understanding of the Internal Revenue Code280E, which governs the tax cannabis accounting treatment of businesses involved in the sale of controlled substances, including cannabis. Our experienced cannabis accountants are well-versed in this code and will work closely with you to maximize your tax deductions while ensuring compliance with all relevant regulations. We’ll help you minimize your tax liability, optimize your financial performance, and keep your business running smoothly. Additionally, banking restrictions create further complications for accounting in the cannabis industry. Many financial institutions are reluctant to work with cannabis businesses due to federal regulations, leading to cash-intensive operations.

NACAT Pros provides educational tools for accountants and financial professionals to enter into the Cannabis industry for untapped Online Accounting professional potential. Our mission is to help accountants fall back in love with accounting again by changing the current state of the accounting industry from being high-stress and highly competitive to a collaborative, value-producing network of services. We help you understand how to provide world-class service, as well as give you the downloadable tools that you can use immediately on day one to serve these clients. Everything from properly on-boarding your Cannabis/CBD/hemp client, setting up a perpetual data room, month-end tie-outs, day-to-day bookkeeping, etc.

Cannabis Accounting: What Your Clients Need to Know

Complaints about Elliott’s management include a whistleblower lawsuit filed by a state lab regulator who claims she was fired after pressing agency officials Grocery Store Accounting to respond to allegations of pesticide-contaminated cannabis products. Such complaints also underlie current civil litigation filed by two private laboratories against 13 competitors alleging widespread cannabis testing fraud. And a previously undisclosed state Department of Justice investigation in 2022 looked into claims the Department of Cannabis Control had a political motive to protect illegal operators. Without a well-structured chart of accounts, your accounting team may not have enough detail to properly categorize transactions.

These sub-niches include farming, processing, manufacture, labs, distribution and retail, and many times all of those will fall under the same company. On top of that, there is a lack of Big 4 industry guides or training, no GAAP guidance, and almost no tools or workpapers outside of our program, making it extremely difficult to serve these clients well and maximizing your time! From banking to transportation of goods; from seed to sale; from payroll to paying bills, there are challenges that most businesses do not have to deal with that hinder day-to-day operations. Cannabis and CBD/hemp accounting professionals need to be aware of these challenges and must be able to help their clients navigate and find solutions so that they can properly operate their business. A Management Company would be organized to provide services typically considered operating expenses (professional services, insurance, etc.) to the licensed cannabis business and charge a management fee to the licensed entity.

When to Consider Outsourced Accounting for Your Cannabis Business

• Another case study highlights a vertically integrated cannabis company in California that faced challenges with inventory tracking and cost allocation.
• Crucial to the last step is investing in software allowing the separate features of the process, the shipments, the invoice records, and the bank account to “talk,” or interface, with each other.
• Prepare to revolutionize your approach and reign supreme in the realm of cannabis entrepreneurship with the expertise and guidance of Sandy Suchoff.
• Many states require businesses to track and report all cash transactions accurately.

Failure to file and retain 8300 forms increases the risk of audit and the loss of banking service. Similar concerns about licensing were raised in an August 2024 state audit that criticized the Department of Cannabis Control for poor management of $100 million in licensing grants. A February update by the auditor noted the program appeared to be back on track in most communities, but the cannabis agency remained slow in approving project changes.