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Accounting & the Cannabis Industry – DSJ Breakdown

As the use of legal cannabis is becoming more common around the United States, the recreational marijuana industry is expected to be valued at $100 billion in the coming years. In an industry that is growing rapidly, there is a plethora of new and upcoming cannabis companies that need the assistance of accountants.

Overview

Although recreational cannabis has not been legalized on a federal level, there are still companies in states where marijuana is legalized that need accounting assistance. The assistance is needed in order for these companies to stay in compliance with the particular states they conduct business in. As previously mentioned, recreational cannabis use is still illegal on the federal level, and the Drug Enforcement Administration still considers it a Schedule 1 substance. This is ultimately why accounting professionals must have an understanding of each state’s tax codes and regulations regarding recreational marijuana when helping these budding companies.

 

Understanding the Tax Codes

When working with cannabis companies, the most crucial step that must be taken is gaining a thorough understanding of the tax codes for the cannabis industry as well as the other industries related to it. Some industries that have close ties to the recreational cannabis business include farming, lab testing, retailing, and more. Being able to interpret the tax code and how it relates to these other industries can help reduce the company’s tax liability in a legal way.

CPAs Not At Risk

There are currently thousands of CPAs that assist cannabis companies in almost every state where it is legal. As of now, there has not been a single report of a CPA losing their license or being reprimanded for serving a state-legal cannabis company. Similarly, all the other companies that provide services for legal cannabis companies have not been reprimanded in any way.

Wrap Up

The legal cannabis industry will continue to become more popular as time goes on, and the industry is already underserved and is in need of accounting assistance. The American Institute of CPAs (AICPA) has recognized this need. AICPA has been hosting conferences over the past three years where experts on this topic are able to give CPAs and other accounting professionals a better understanding of this niche industry.

 
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