Cannabis Accounting Questions to Review With Your CPA

Cannabis operators need accounting advice that reflects their actual products, licenses, activities and tax year. Federal developments make a blanket statement about every cannabis business unreliable. Use these questions to prepare a conversation with your CPA and legal counsel before changing a tax position.

1. Which activities and periods need Section 280E review?

Section 280E generally restricts deductions and credits for businesses trafficking in Schedule I or II controlled substances prohibited by federal or state law. Ask your advisers which activities, substances and periods fall within that rule. Do not assume the same treatment applies to every cannabis operation.

Dated source context: on April 23, 2026, Treasury and the IRS announced planned guidance following a DOJ order affecting certain medical marijuana categories. The announcement discussed Section 280E, mixed activities and transition rules. It is not a determination of your current tax treatment. Have your advisers check subsequent guidance, effective dates and your eligibility before filing or amending.

Read the Treasury and IRS announcement of April 23, 2026, then confirm the applicable current rules with your advisers.

2. Do the records reflect the actual business?

Bring licenses, entity details, contracts, prior returns, inventory records and a breakdown of activities. Ask which income and costs belong to which activity and what evidence supports the treatment. Reconcile the records before using revenue as a measure of available cash.

Inventory accounting, cost of goods sold and an ordinary expense deduction are different questions. Ask your CPA which costs qualify for which treatment and what substantiation is needed. Do not treat every production-related cost as automatically deductible.

3. What would an entity change actually accomplish?

Creating another company alone does not establish a deduction or tax saving. Evaluate any proposal from the real activities, ownership, contracts, operational requirements and administrative costs. Coordinate tax analysis with legal counsel before restructuring.

Hypothetical illustration, not a Cachet client case: a dispensary also sells merchandise. Ask advisers to review the activities, shared expenses, contracts and inventory. Evaluate any allocation or entity proposal on those facts rather than assuming separate incorporation changes the tax result.

4. Does the cash forecast include tax obligations?

Ask for a forecast based on actual records and stated assumptions. Review payment timing, inventory needs, operating costs and the tax positions your advisers support. Compare a base case with slower sales or delayed receipts, and identify when cash could become tight.

Agree on when the forecast will be updated and which changes should trigger a conversation. Clear records and regular review support decisions; they do not guarantee savings, eliminate audit risk or establish a filing position.

5. Who owns the next review?

Ask a prospective CPA about relevant experience, the scope of work and coordination with legal counsel. Define who supplies information, who reviews technical positions, which dates matter and how questions are handled between filings. Confirm the engagement before assuming particular services are included.

Talk with Cachet

Cachet is a Beverly Hills CPA firm serving a range of clients. Bring your operation and upcoming decisions into the conversation. Explore Cachet services or contact Cachet.

General educational questions, not individualized tax or legal advice. Updated October 1, 2026 to remove blanket rescheduling and entity claims and unsupported outcomes. Original publication date retained. No CPA review is claimed.