Cannabis

The cannabis industry operates within differing state regulatory frameworks and evolving federal guidance. Licensing requirements, product testing standards, seed-to-sale tracking mandates and tax structures may vary dramatically by jurisdiction. For multi-state operators, complexity increases as different entities in numerous states may present several structural issues that need to be addressed.  

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Cannabis companies face higher federal tax rates compared to traditional businesses due to IRS Section 280E restrictions. IRC Section 280E prohibits deducting ordinary business expenses while still allowing cost of goods sold deductions. Our cannabis tax planning specialists develop 280E accounting strategies that maximize allowable cost of goods sold (COGS) deductions, implement tax-advantaged entity structures, provide exit planning consulting in exits to ESOP’s and position businesses for immediate tax relief when rescheduling occurs.  

Navigating IRS Form 8275: Key Takeaways from Fact Sheet 2024-32 on IRC Section 280E Disclosure Standards – Withum 

Federal restrictions create banking challenges that most industries never face. Many cannabis businesses still only have access to a select number of banks in the states in which they operate and limited access to pension administrators, payroll companies, and traditional credit lines. Our team helps cannabis operators establish transparent cash flow management practices through financial modeling. We also implement internal controls that satisfy both regulators and investors. 

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Cannabis businesses face heightened audit and reporting expectations, whether they are public companies subject to PCAOB standards or private businesses preparing for investment, financing, or transactions. Withum’s Cannabis Services Team serves public and private companies across the industry, addressing cannabis‑specific accounting matters, including inventory valuation, uncertain tax positions related to IRC Section 280E, transaction accounting, technology and internal control considerations, and regulatory risk disclosures, delivering practical audit solutions. 

Financial Compilation Services | Withum 

Transactions with cannabis companies carry unique complexities to accommodate state license transfers, organizational structures with differing entity choices, and valuation challenges given limited comparable data across very different state cannabis economies. Successful deals require precise business valuations, financial due diligence to negotiate a fair working capital target for the deal and settlement of thereafter, transaction structuring to achieve an optimum tax treatment for the transaction, and ERP solutions to integrate various cannabis software platforms. Our cannabis M&A professionals support buyers, sellers, and investors through every transaction phase. 

A Roadmap to Success: M&A and Capital Strategies for Cannabis Businesses – Withum 

Scaling cannabis operations efficiently requires modern financial systems that handle seed-to-sale compliance tracking, batch-level inventory costing, and product category profitability analysis. Due to complexities, cannabis operators rely on spreadsheets or generic software that in many cases have significant limitations to provide real-time operational visibility. With over a decade of experience, Withum continues to choose to work with the cannabis industry, helping operators select, implement, and optimize ERP and cannabis accounting software systems that deliver the financial data needed for strategic decision-making. 

CRM and ERP Consulting Services – Withum