Running a business is complex. But running a business in a new industry, with extreme regulations, and its own tax law, give a whole new meaning to complex. Whether you’re a cannabis grower, retailer, dispensary, or investor – that’s why it’s so important to align with a CPA that understands the ins and outs of the cannabis industry.
Here are 5 questions you should be asking a prospective CPA or tax advisor before hiring them.
The cannabis market has very unique challenges and compliance requirements, so a provider should be experienced and well-versed. Ask if they’ve worked with other business owners, what associations they participate in, and get a good feel if they have actual experience that would benefit your business. Don’t be shy in asking for references.
At the federal level, this section of the tax code severely limits business deductions which, as many business owners are aware, can strongly impact profitability. This requires strategic tax planning and navigation. Back in 2023, New Jersey actually decoupled marijuana businesses from 280E at the state tax provision level, so licensed New Jersey cannabis businesses are allowed to take both their cost of goods sold and operating expenses as full deductions on their state income tax returns. A good CPA will offer strategies that help you manage tax liabilities effectively, even with the restrictions imposed on cannabis businesses.
The laws and regulations are constantly changing so you want to be sure your CPA is proactive about staying informed at the state and federal levels. Are they active in cannabis organizations? are they pursuing CPE in that area? are they communicating updates with their clients? do they have relationships within the industry that can help set you up for success? You want to feel confident that you’re in good, knowledgeable hands.
Being in a nuanced industry should require tax planning throughout the year, not just seeing your CPA during tax season. A CPA and advisor should be able to discuss a plan with you to ensure your entity setups, tax planning, compliance, bookkeeping, and payroll are all appropriately covered. You can take it a step further and ask about reporting, forecasting, and even more growth guidance. Your accountant should not only help you stay compliant but also help you plan for business expansion and changes down the line in the legal landscape.
A cannabis CPA that has worked with other dispensaries can make recommendations based on what has or hasn’t worked well for other businesses. If you are new to running a business in general, your CPA can set you up with accounting software that will help organize and streamline your company’s accounting. You want to make sure your professional advisors are familiar with the software and can support you when you have questions or concerns.
By asking these questions, you’ll be better positioned to choose a CPA who can guide your dispensary or marijuana business through the complexities of tax compliance, ensure financial health, and minimize risks associated with the cannabis industry.
Additional NJ Cannabis Business Resources:
Associate Partner
Ren III provides tax, accounting, and advisory services to a broad range of clients, with a specialty for manufacturers, title insurance companies, and professional service providers.
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