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IRS Publishes Federal Tax Resources for Cannabis Businesses


Posted on September 30, 2020 |

As reported by Forbes.com on September 14, 2020, the Internal Revenue Service (IRS) recently published a webpage devoted to tax compliance for U.S.-based cannabis businesses. With states across the country taking varying approaches to legalizing and decriminalizing marijuana, and with marijuana remaining a Schedule I controlled substance at the federal level, navigating tax compliance is an extraordinarily complex task for cannabis businesses, and business owners who wish to avoid unwanted scrutiny from the IRS need to work with an experienced Boston tax lawyer to avoid costly mistakes.

The IRS’ Federal Tax Guidance for Businesses in the Marijuana Industry

The Marijuana Industry page is hosted within the Small Business and Self-Employed portion of the IRS’ website, and it provides various resources that are both specific and non-specific to operating within America’s flourishing cannabis industry. Topics covered on the page include:

  • Income reporting for cannabis businesses (including reporting income from cash transactions)
  • Cash payment options for cannabis businesses that do not have bank accounts
  • Internal Revenue Code (IRC) compliance for cash transactions involving more than $10,000
  • Quarterly estimated income tax payment compliance
  • Recordkeeping for cannabis businesses in order to ensure accurate reporting to the IRS

The IRS’ Marijuana Industry page also includes a list of links to additional resources that cover topics ranging from general small business tax compliance to reporting gain and loss on transactions involving virtual currencies. With regard to the sale of cannabis-based, cannabis-derived and related products specifically, the IRS has also published a list of frequently-asked questions (FAQs). The IRS' marijuana industry FAQs include:

  • “My business is a marijuana dispensary that I operate in compliance with my state's laws. . . . Do I have the same income and employment tax filing obligations as any other business?”
  • “If I can't fully pay the amount I owe, are payment plans available that I can afford?”
  • “What penalties or additions to tax could a participant in the marijuana industry be subject to if adjustments are made during an income tax audit?”
  • “Will penalties . . . be proposed if an audit ends with the IRS proposing adjustments for a participant in the marijuana industry?”
  • “I operate a business that consists of selling marijuana. Can I claim deductions to determine my taxable income?”

While the IRS’ answers to these questions are helpful, they lack many of the key details the owners of dispensaries and other marijuana-involved businesses need to know. To further assist business owners in the cannabis industry, we have published a Cannabis Tax Compliance Handbook for Businesses in Massachusetts. This free resource covers everything from Massachusetts’ cannabis laws to the state and federal income tax implications of operating a cannabis-based business. We encourage you to read our Handbook in detail; and, if you have questions that are specific to your business, we encourage you to contact us for a confidential consultation.

Request a Confidential Consultation with Boston Tax Lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group

If you have questions about tax compliance pertaining to your cannabis business in Massachusetts, please contact us to arrange a confidential initial consultation with Boston tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group. Call 617-692-2989, email ket@thornlawgroup.com or tell us how we can help online today.

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