STEVEN TOSCHER, SANDRA BROWN and JONATHAN KALINSKI to Speak on Cannabis Tax Examination Issues
We are pleased to announce that Steven Toscher, Sandra Brown and Jonathan Kalinski will be speaking at the upcoming CalCPA webinar, “Cannabis Tax Examination Issues” on Tuesday, September 28, 2021, 9:00 a.m. – 10:00 a.m. (PST).
The sale and distribution of cannabis for recreational or medical use is a powerful economic engine generating billions in annual revenue, with over 40 states and the District of Columbia having some form of legalization of the substance. Despite state relaxation of marijuana prohibition laws, regulated cannabis businesses can be subject to hefty tax assessments and penalties without careful planning.
Under Section 61, businesses must report all gross income from whatever source it is derived. However, under Section 280E, cannabis businesses cannot deduct rent, wages, and other expenses unless it is for the cost of goods sold (COGS), resulting in a substantially higher tax rate than other companies on their income. The IRS issued guidance to its agents on conducting audits of cannabis businesses giving IRS agents the authority to change a cannabis business’ accounting method. Under Section 280E, certain costs are not included in COGS. Thus, they remain non-deductible for income tax purposes.
As more states legalize cannabis and make available licenses to grow, manufacture, distribute, and sell cannabis, the IRS has increased cannabis tax audits, which could result in unbearable tax liabilities.
Listen to our panel discuss recent IRS enforcement actions involving Cannabis Tax audits and examinations, including the IRS’s use of summons enforcement in this area and tax professional strategies.
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