IRS Answers Questions About Taxation of Cannabis Companies

The IRS has released guidance specific to the cannabis industry in the form of an FAQ and a dedicated Marijuana Industry page.

Much of the guidance confirms the tax obligations and ineligibility of cannabis companies for federal tax deductions under Section 280E. It also reminds taxpayers of an effective tax mitigation strategy that maximizes the deduction of cost of goods sold (COGS).

Other highlights of the guidance include:

  • Payment plans and other options available to marijuana companies to pay outstanding taxes over time.
  • Penalties and additions on adjustments made during an income tax audit.
  • Best practices for documenting and reporting cash payments over $10,000 in a single or related transaction(s).

Grassi’s Cannabis Advisory Group will continue to keep you updated on the latest IRS guidance and related pronouncements from state taxing authorities. Contact your Grassi advisor or John Pellitteri, Cannabis Practice Leader, to learn more about how this guidance affects your cannabis business.


Robert M. Bernstein Robert Bernstein, Partner at Grassi, offers tax and consulting advice to professionals in industries such as Cannabis – medical and adult use; Industrial Hemp companies; CBD companies; Auto dealers, car washes, gas stations, quick lube stations, manufacturers, constructors, real estate owners and developers. Robert is now applying his talents to the ever expanding cannabis space - medical and adult use as well as Industrial... Read full bio

John V. Pellitteri John V. Pellitteri is a Partner at Grassi and leads the firm's Healthcare and Cannabis Service Practices. Possessing over 30 years of experience in accounting, auditing, tax planning and business consulting, John is now applying his talent to the burgeoning cannabis industry. John possesses comprehensive accounting and taxation knowledge, which combined with his healthcare consulting experience, allows him to provide an all-inclusive assessment of... Read full bio

Zachary Gordon Zachary Gordon is a Senior Manager in the Accounting Services group at Grassi and a member of the firm’s Cannabis Advisory practice. He specializes in tax planning and compliance services for small businesses, private equity firms and family offices. He has extensive experience in financial statement compilations and reviews, technology implementations, deal and business structuring, due diligence and business advisory services. Within the Cannabis... Read full bio

Categories: Advisory