Introduction A cannabis business’s bookkeeping has one job: produce defensible numbers that survive (1) tax scrutiny—especially IRC §280E, (2) state excise/sales tax audits, and (3) licensing “track-and-trace” inspections. The practical implication of §280E is blunt: most operating expenses don’t reduce federal taxable income, so the bookkeeping system must be built to (a) correctly compute gross …
Introduction U.S. cannabis accounting is hard for one main reason: federal taxes treat state-legal cannabis as Schedule I trafficking, so IRC §280E blocks ordinary deductions and credits, leaving COGS as the primary path to reduce federal taxable income. That single constraint drives most of the industry-specific accounting practices: Federal tax rules IRC §280E denies deductions/credits …
Introduction Federal cannabis taxation is still dominated by IRC §280E, which denies deductions and credits for amounts paid or incurred in a trade or business that “consists of trafficking” in a Schedule I or II controlled substance prohibited by federal law (and by the law of the state where conducted). This applies even if the …