States that sell cannabis legally in the United States are tightly controlled by the federal government and the fed has required that Cannabusinesses detail every aspect of the process from cultivation to the distribution of the plant. Cultivators must preserve an accurate record of the cultivation process starting with the number seeds planted, noting each change and movement along the process and the plant has to be accounted for up to the point it is processed for consumption. There are different tax rates placed on recreational cannabis and the tax rate is different from the amount applied to medical patients and this needs to be taken into account when determining the cost of goods sold. Marijuana has been illegal for many years and the federal government has made the industry well aware that cannabis firms must have a seed-to-sale track sheet encompassing accurate information and the feds will administer penalties to companies who do not fully comply with the process.
It’s important for business owners in the cannabis industry take into account that their companies will not be able to do federal withholdings for income tax purposes and Social Security inputs will not be taken into account due to the fact that these firms do not have access to banking services. Furthermore, section 280E states that cannabusinesses cannot deduct business expenses aside from the cost of goods sold. Companies who want to take advantage of the IRS 280E legislation must be able to discern between what is considered production costs from what is considered to be sales costs and account for both in a detailed manner. Software products like BioTrack THC and MJ Freeway are great systems that help employees and companies meet the needs of federal tax regulators and also gives the companies and investors a transparent view of profits and losses.