As marijuana becomes legal throughout the United States, the state of Oklahoma is no exception. In fact, CBD stores are popping up and thriving all over Oklahoma. The problem, however, is that the local government hasn't quite caught up to these stores when it comes to taxes. As with other CBD stores throughout the nation, the stores in Oklahoma only take cash (soon they will additionally accept debit cards, but only in $5 increments), which can be a big problem when it comes to paying taxes.
According to Oklahoma State Question 788, the Medical Legalization Initiative, that is slated for June 2018, is to once again determine whether medical marijuana should be legal in the state. In the meantime, dispensaries are licensed, open, and selling CBD products via cash. Now, it is only a matter of time before the Tax Commission (OTC) collects due taxes.
What does this mean for CBD business owners and how should they prepare when the tax man comes calling?
Did you know that CBD dispensaries are far more likely to get audited by the IRS than other business? Why? First of all, because the federal government still considers marijuana illegal and therefore falls under the tax code, Section 280E. This section governs how taxes are collected, including the fact that CBD businesses can't deduct expenses like other businesses. For example, they can't write off rent, payroll, and marketing. This, in turn, makes their taxes even higher.
The fact that CBD business are cash only (banks are too afraid to get involved due to the federal illegal status of marijuana), also raises red flags when it comes to the IRS, and it doesn't stop there. Local tax collectors in Oklahoma may certainly look at this cash business as suspicious. Are business owners skimming off the top of profits? Are they underreporting profits?
Protect Your CBD Business with a Qualified Tax Attorney
Before the OTC comes to collect taxes from your CBD dispensary business, it is best to be prepared. The only way to really do this, to know that you're following the laws and that you're not getting taken advantage, it's best to have an experienced and qualified tax attorney representing your business. Before it's too late, establish a relationship with an Oklahoma tax attorney to make sure you pay only what you need to pay for your dispensaries' taxes and avoid a tax audit in the future.
Because the Oklahoma OTC has to collect taxes at some point, dispensaries will owe money for each quarter they were in business. This can surely add up to a hefty sum. And how will your business pay this tax? With cash? Most likely since CBD businesses are still not allowed to use credit card transactions, debit card transactions, write a check, or deposit their cash profits into financial institutions. Really, no one is interested in being part of a federally illegal substance that could cause them to be accused of money laundering.
Besides the questions of when and how to pay, along with what can and can't be written off, you need an experienced tax attorney who handles the IRS/OTC on a daily basis and knows the ins and outs. To find out more, contact a local tax attorney in Oklahoma today. Travis W. Watkins Tax Resolution and Accounting Firm can be reached at 800-721-7054 for your Free consultation.