If you can’t measure it, how can you correct it?
After conducting more than 700 cannabis compliance inspections with our automated compliance software platform built on Amazon AWS and Apple, Adherence is sitting on a mountain of operational compliance data by operational license type (e.g. Cultivation Centers, Dispensaries, Manufacturers) and jurisdiction (State, County & City). The Adherence SCORE App inspects 15 categories of cannabis compliance and hundreds of regulations to provide a detailed report and compliance score. What’s your compliance score?
Here are the Top 5 Marijuana Inventory & Financial Infractions:
- The licensee does not reconcile all on-premises and in-transit marijuana product and inventories at the close of business each day
- The licensed business is non-compliant with the US IRS tax code 280e
- The licensed business is not current with related state and/or local tax payments (excise, sales, etc.)
- The licensed business is missing required Currency Transaction Reports (Form 8300) for related deposits of cash over $10,000
- The facility waste logs are incomplete and/or missing information on entries
For all license types (Dispensaries, Cultivation Centers, Manufacturers, Distributors, etc.), accurately managing inventory is one of the most difficult areas of focus. Owners are often forced to deal with multiple, disparate systems, e.g. Physical Inventory; Point-of-Sale; State-Mandated Inventory Tracking; Accounting. Unless inventory is reconciled daily, between all systems, errors and mismatches will occur. Adherence recommends trusted 3rd party inventory inspections and reconciliation efforts to ensure these systems match and tax payments are accurate.
Marijuana business are not allowed to expense certain business expenditures as they sell, produce or manufacture a federally illegal or scheduled drug. Solutions to maximize business expenses exist: e.g. COGS formulas, Chart of Accounts (Cap Ex vs Op Ex), IRS 263A, etc. The important item to note here is that the business MUST define the landscape BEFORE the IRS visits. Even if marijuana is federally de-scheduled in the future, the IRS can always revisit the past and levy fines and penalties for 280e.
State and Local Taxes
Are your state and local taxes correct, accurate and timely? If not, fines, penalties and liens can occur. Do you have any late filings? If so, penalties may be due. Failure-to-file penalties are usually the most costly. If you feel you or your business may have outstanding tax liabilities, contact a trusted CPA to address the situation immediately. Once an arrangement is made with taxation authorities, the penalties and interest will cease, or get charged at a much lower rate.
Currency Transaction Reports – Form 8300
Is your business filing the proper cash transaction forms? For any cash payments or receipts over $10,000.00 in a single transaction, the business or individual must file a Form 8300. If you are required to file a Form 8300, you must do so by the 15th day after the transaction occurred. Fines and penalties start at $25,000.00 and can lead to a full-blown IRS audit. For more information, contact Adherence or visit the IRS Form 8300 Reference Guide.
Waste and Diversion
Does the facility document all associated inventory waste? This is important, as waste is a common area where product diversion occurs. Any diversion (cash or marijuana product) can lead to license revocation and criminal charges. Clear and accurate waste logs are imperative to show regulators that all product and associated waste is fully accounted.