Tax Information

Hello, everyone. I'm new here - first post.

I live in Colorado and am growing my own plants for personal use. I plan on selling the overage to dispensaries for some additional income. I have my BS in Business and Accounting and tax training. I hope that my overage sales and tax work will provide me enough income to be self-employed, and therefore, I quit my job.

I am working with a few dispensaries that are getting started and many have expressed ignorance with tax issues.

I need information on filing both sales and income taxes. I would like to know about state tax requirements and how income is reported. I would like to know how federal taxes are paid. This is a little difficult since marijuana use and sales are still a federal offense. I don't believe someone who grows for personal use and sells overages will need to do more than claim hobby income. But individuals who may be growing for more than personal use and making a business of it will need to do more.

However, in my research, I have found that federal entities are prosecuting for other reasons even if growers are in a legal state. Several people under arrest for federal tax evasion. It seems smart to me to cover ass, so would like to buiild this business niche with some help.

Thanks a lot. Have been reading posts for quite a while and have healthy plants to show for it!

Frankysj said:

Hello, everyone. I'm new here - first post.

I live in Colorado and am growing my own plants for personal use. I plan on selling the overage to dispensaries for some additional income. I have my BS in Business and Accounting and tax training. I hope that my overage sales and tax work will provide me enough income to be self-employed, and therefore, I quit my job.

I am working with a few dispensaries that are getting started and many have expressed ignorance with tax issues.

I need information on filing both sales and income taxes. I would like to know about state tax requirements and how income is reported. I would like to know how federal taxes are paid. This is a little difficult since marijuana use and sales are still a federal offense. I don't believe someone who grows for personal use and sells overages will need to do more than claim hobby income. But individuals who may be growing for more than personal use and making a business of it will need to do more.

However, in my research, I have found that federal entities are prosecuting for other reasons even if growers are in a legal state. Several people under arrest for federal tax evasion. It seems smart to me to cover ass, so would like to buiild this business niche with some help.

Thanks a lot. Have been reading posts for quite a while and have healthy plants to show for it!

Click to expand...

Ok, where to start. I've also got my accounting degree and work as an AP manager and cost accountant, so I've got some experience with the sales tax side of things (I do them for about 25 cities/counties every stinking month). I've also looked into the federal rules a little, so I'll share what I know. First off, sales taxes have to be filed on a monthly basis for most of the Denver metro cities and counties ( a few are quarterly). State sales taxes are due monthly. All must be paid by the 20th of the month, or you get nailed with penalties and interest. The tax rates vary a lot, so you need to go to the state department of revenues web page and find the list of tax rates broken down by city and county. The big question is whether or not you have nexus someplace. For example- Does your dispensary in Denver deliver to Lakewood? If so, you're going to need to charge and pay the Lakewood taxes on any sales that actually take place there. Same goes for all the other city and counties. If you just have a store front and all transactions take place on the premises it's a lot easier, because there's no question about what cities taxes need to be applied. Oh, you also need to collect any RTD, LID, RTA , etc taxes. Right now there are only LID's in Broomfield and the parts of Littleton that fall into Jefferson County that have to be collected seperately, but that sort of stuff changes on a quarterly basis.

Now, as to the Fed's. Just because they don't recognize the legality of medical marijuana doesn't mean that they don't expect you to keep accounting records and pay taxes just like any other business. You don't really have to go into all that much detail about what your business does when your filing your IRS forms (herbal medicines grower/distributor has a nice ring to it), and they generally don't share information with the DEA unless there is a warrant involved (in which case your already screwed), so I would handle it just like any other small business for accounting and tax purposes. Don't forget- all your grow equipment is an expense, and a fair amount of it needs to be depreciated rather then just expensed in the first period of it's use.

You're also going to want to look into the specific accounting rules governing agriculture and farming, because I'm pretty sure you have to do some estimations of the valuation of your crops that are still being grown at tax time. Like any other accounting set up record keeping and proper recognition of costs and revenues is going to be key.