Executive Summary
Ben Condon, CPA, Founding Partner of BC Consulting, LLC kicks off his blog series which will define the jargon, provide a general conceptual overview, and implications of state and local taxes on cannabis businesses.
Albert Einstein once said "The hardest thing to understand in the world is the income tax." Well, he was right!!! That was even before code section 280E, and most states didn't even have income taxes back then, yet.
Early in my career as a tax CPA, I was often confused how federal and state taxes intertwined, and any research left me more confused and created more questions than I started with. I hope to share my understand with the readers of this blog. My philosophy is not to keep my knowledge secret, but to share it, even if that means competitors learn a few things. You should be weary of any CPA that has a "secret" calculation or does not wish to share with you their "proprietary" methodologies. A great CPA should help further their clients' understanding of the tax implications of any transaction by providing a clear logical, legal framework from which to operate. That is my goal.
In this blog series we'll cover the State Taxes 101, and and the more advanced topics of how they specifically relate to cannabis business, dare I say State Taxes 420?
The general topics to be covered:
The various types of taxes that apply to all types of businesses, including but not limited to: income, minimum, alternative minimum, real property, personal property, business and occupancy, franchise, excise, sales, capital, cultivation, transfer, withholding, and margin taxes. In addition, Cannabis specific taxes will be covered, such as the Oregon marijuana sales tax or the California cultivation and excise taxes.
We will walk through the conceptual road-map of income from the profit and loss statement to the Federal tax return to State tax return, and possibly a locality tax return. We will also discuss common Federal, state, and local differences along the way, such as:
- Federal 280E Disallowed Deductions allowed for States
- Depreciation Adjustments
- Loss Carryforward / Carryback differences
- Statute of Limitation differences
We will also cover multistate tax concepts, such as:
- Nexus & Economic Nexus
- Allocation and Apportionment
- Flow-through Entity withholding and Composite Returns
- Income Sourcing and throwback
In parallel with this blog series, I will also deep dive into specific states' taxing regimes and discuss the taxes levied on cannabis business in those states and provide tips on how to stay compliant. "How Oregon/California/Washington/Nevada Taxes Cannabis"
I'm happy to focus on any topics or specific states depending on your level of interest.
Hit me up in the comment section and stay tuned!
