Tax Lawyer Blog

A Blog written by the Tax Attorneys for Individuals and Businesses

Marijuana Accounting and Legal Compliance

Since marijuana is still illegal at the federal level and subject to continually evolving regulations at the state level, cannabis producers, distributors, and retailers need to develop compliance programs and procedures as early as possible in the life of their business to protect themselves from legal challenges.

An effective cannabusiness compliance program will ensure that the company’s owners, managers and employees do the following:

Identify and prioritize applicable laws and regulations

Federal, state, and local laws and regulations relating to cannabusiness operations should be identified, researched and regularly monitored. Those that pose the greatest risk of criminal sanctions or license revocation should be prioritized, and procedures should be implemented to ensure compliance.

Develop and document standard operating procedures

Standard operating procedures and manuals provide documented proof of the company’s efforts to comply with cannabis laws and regulations. A company’s compliance program should also include personnel training on marijuana laws to ensure that all employees know how cannabis laws and regulations affect their everyday duties.

File tax returns and pay taxes on time

Not filing tax returns puts your company at risk of audit by federal, state and/or local taxing agencies. Noncompliance will likely result in an assessment of back taxes, penalties, interest, and the loss of business licenses and permits.

Produce audited financial statements

The preparation of financial statements by an independent auditor on at least an annual basis will not only identify areas of possible non-compliance and fraud/abuse, but will also serve to document information reported in your tax filings if and when you are audited by the government. As noted in our post on cannabusiness planning, financial statements are key in securing outside investors.

San Francisco Cannabis Law Attorneys

The compliance program of your marijuana-related business should be custom-tailored to your company’s specific needs and risks. A good faith effort to be in compliance will be looked upon favorably by state and local regulators, who will be more likely to help you remedy minor violations and reduce your fines and penalties in light of your efforts. Contact the Cannabis Practice Group at Moskowitz, LLP to learn more about how we can help.

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