FAQs
Cannabis Accounting Questions and Answers
Common questions about engagements, federal tax treatment, and the regulatory and tax structure that applies to licensed cannabis businesses in Massachusetts.
Working With the Practice
- What does an engagement typically include?
- Most engagements include monthly bookkeeping and close, reconciliation of inventory and tracking-system activity, financial statements, and annual tax preparation. Advisory and project work is added as needed.
- Do you work with operators who already have a bookkeeper?
- Yes. A common structure is in-house daily entry with our review, reconciliation, inventory costing, and reporting on a monthly cycle.
- How is pricing determined?
- By scope: license types, transaction volume, number of entities, and the condition of current records. Pricing is provided in writing before work begins.
- Do you serve pre-license applicants?
- Yes, primarily on financial modeling, entity considerations with your counsel, and setting up accounting before operations begin.
Regulation and Tax in Massachusetts
- Which agency regulates cannabis businesses in Massachusetts?
- The Cannabis Control Commission administers licensing, regulation, and enforcement for both the adult-use and medical programs under General Laws Chapter 94G and the Commission regulations at 935 CMR 500.000 and 501.000, following the Regulation and Taxation of Marijuana Act.
- What taxes apply to adult-use retail sales in Massachusetts?
- Adult-use retail sales are generally subject to a 10.75% state marijuana excise tax plus the 6.25% state sales tax, and municipalities may impose a local option tax of up to 3%, while qualifying medical sales are treated differently. Confirm current rates and categories with the Massachusetts Department of Revenue.
- Do local governments affect cannabis operations in Massachusetts?
- Yes. Municipalities decide whether to allow cannabis establishments and may impose their own permitting requirements, so obligations vary by community.
- How does seed-to-sale reporting work in Massachusetts?
- Licensees record inventory activity in the statewide seed-to-sale tracking system. Keeping accounting records reconciled to those reports supports both inspection readiness and accurate financial statements.
Accounting and Tax Technical Questions
- Does Section 280E still apply to state-licensed businesses?
- Section 280E is federal law and applies to businesses trafficking in a federally controlled substance regardless of state licensure. Any change in federal law or scheduling would need to be evaluated when it occurs.
- What is the most common accounting gap you see?
- Missing departmental coding. Without it, cost allocation becomes a year-end estimate rather than a record supported by the ledger.
- How quickly can books that are behind be brought current?
- It depends on the number of periods and record quality. A short diagnostic gives a realistic timeline before catch-up work begins.
- Do you guarantee tax savings or audit outcomes?
- No. We apply the applicable rules to documented facts and prepare records that can be explained. We do not promise savings, deductions, or particular examination results.
Related Resources
280E Explained
A plain-language explanation of Internal Revenue Code Section 280E, what it disallows, and how inventory costing determines recoverable cost.
Read moreCannabis Accounting Guide
A practical guide to accounting for licensed cannabis businesses: chart of accounts, inventory costing, reconciliation, and monthly close.
Read moreBookkeeping Guide
Daily, weekly, and monthly bookkeeping routines for licensed cannabis businesses, with reconciliation checklists and coding standards.
Read moreDiscuss Your Operation With a Cannabis Accounting Specialist
Call to talk through your license types, current records, and reporting needs, or schedule a consultation at a time that works for your team.