In the Nov. 3 election, voters in New Jersey voted to legalize cannabis for recreational and/or medical use. As the marijuana industry continues to grow generating jobs and profits in New Jersey, CPAs have been asked to provide their services to businesses that cater to the ever-growing industry–but this is uncharted territory.
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The Issues New Jersey From Cannabis Legalization
Cannabis accounting expert, Andrew Hunzicker, CPA discusses the issues New Jersey will face including, cash, banking, and software issues or seed to sale and regulation issues. Andrew is also founder of Dope CFO, a national cannabis accounting/bookkeeping online training company for CPAs, CFOs, and CEOs. His points include:
- Many cannabis companies and their owners are facing high penalties and revoked licenses due to a lack of specialized understanding surrounding required practices. High regulation, unusual tax codes and penalties, cash handling issues, lack of reliable software, merchant services availability, and key reporting and compliance needs are what makes this industry complex.
- Cannabis is still federally illegal, so businesses must adhere to the 280E tax code, which stipulates deductions can’t be taken (for the most part). Because of this, the IRS and local governments want their tax dollars, and are closely watching and are planning on auditing Cannabis businesses pretty heavily.
- Any new Cannabis or hemp/CBD company will inevitably be audited in their first few years of doing business, especially if they do anything that raises red flags. Banks will also be monitoring the emerging companies’ financials closely, with many financial institutions completing “mini-audits” each quarter.
- There is a need for trained /qualified cannabis industry accounting and tax professionals in these states as there is complete lack of industry guides, GAAP guidance, and tools to do the complex accounting and tax work required.