Ep. 16 | Navigating the Cannabis Tax Maze: A Guide for Tax Pros

The Mr. R Show

About the Guest: Kareyna Miller, CPA, CRISC

Kareyna is a seasoned CPA with extensive expertise in the cannabis industry. Based in Michigan, Kareyna has carved out a niche working with smaller cannabis businesses, particularly growers and processors. With prior experience in office technology, she applies her entrepreneurial mindset to help clients navigate complex regulations and optimize their financial practices within the cannabis sector. Kareyna is actively involved with the Michigan Association of CPAs, where she leads initiatives focused on the cannabis industry, sharing her insights and expertise with peers.

Episode Summary:

In this enlightening episode of the Mr. R Show, hosted by Chris Picciurro and John Tripolsky, you'll navigate through the intricacies of cannabis and taxes with Kareyna Miller, CPA, CRISC, a renowned CPA specializing in the cannabis sector. The discussion centers on the nuanced tax obligations and compliance challenges that come with operating in this burgeoning industry. With cannabis being federally illegal but permitted in various states, tax professionals face unique obstacles. This episode offers CPAs and tax pros critical insights into understanding how to work with cannabis clients while staying compliant with both state and federal laws.

Kareyna elaborates on her professional journey, detailing how her affinity for small businesses and virtual accounting led her into the cannabis landscape. She explores the complexities of cannabis taxation, focusing on compliance requirements like the Annual Financial Statement (AFS) which every licensed cannabis business in Michigan must adhere to. The discussion extends to the industry’s operational challenges, including banking difficulties, payment processing issues, and the potential impact of federal tax code changes. This episode is packed with practical strategies for managing the financial intricacies of cannabis businesses, making it a must-listen for tax professionals.

Key Takeaways:

• Understanding Compliance: Cannabis businesses must adhere to state-specific regulations, including critical compliance procedures like the Annual Financial Statement (AFS).
• Industry Challenges: Cannabis businesses face significant challenges with transaction regulations, banking compliance, and payment processing.
• Tax Implications: Federal prohibitions under 280E restrict many typical business deductions, presenting unique financial challenges for cannabis retailers.
• Entity Structuring: Strategic structuring, such as separating real estate and equipment rentals, can offer operational advantages.
• Federal Rescheduling Impact: The potential rescheduling of cannabis in federal law could dramatically impact tax obligations and operational structuring.

Notable Quotes:

• "I'm passionate about tax professionals and accounting professionals carving out a niche that they have a passion for." - Kareyna
• "You can't just treat inventory-type expenditures as an expense like you would for other businesses." Kareyna
• "280E says you can't take expenses and deductions for businesses trafficking in Schedule I or Schedule II substances." - Kareyna

Resources:

• LEACIF Accounting & Advisory
• Connect with Kareyna on LinkedIn
• MRR Institute: Resources, coaching, and opportunities offered for Tax Pros
• Michigan Association of CPAs: Resources for professional development and updates within the tax industry

Stay engaged with the Mr. R Show for more expert insights that empower tax practitioners to navigate and thrive in the evolving landscape of the tax industry.

• (00:07) - Exploring Cannabis Taxation and Niche Opportunities for Professionals
• (03:21) - Kareyna Miller, CPA's Journey to Cannabis Industry Accounting
• (09:11) - Navigating Complexities of Cannabis Industry Accounting and Regulations
• (12:49) - Navigating State-Specific CPA Compliance and Attestation Requirements
• (18:39) - Navigating Accounting Challenges in the Cannabis Industry
• (27:10) - Challenges and Strategies in Cannabis Retail Taxation
• (31:41) - Navigating Federal and Michigan Tax Implications for Cannabis Businesses
• (37:10) - Navigating Legal Transitions in the Cannabis Industry
• (41:23) - Potential Impact of Cannabis Rescheduling on Tax and Compliance
• (46:10) - Navigating Compliance and Client Challenges in the Cannabis Industry