Entities that actually obtain a dispensary registration certificate from the Arizona Department of Health Services will be required to file federal income tax returns that are substantially different than tax returns of other businesses. Medical marijuana dispensaries must keep financial books in a way that will assist the dispensaries’ CPAs in preparing the federal and state income tax returns. A particularly troublesome issue arises from Internal Revenue Code Section 280E that prohibits deductions for expenses paid or incurred in connection with trafficking in marijuana.
Dispensaries should hire an accountant and tax advisor who have experience representing and advising medical marijuana dispensaries. They should not pay an inexperienced person to learn on the job. Here are two people who have experience dealing with the federal income tax treatment of medical marijuana dispensaries.
- Henry (Hank) Levy, CPA/ABV, is the owner of an accounting and consulting firm in Oakland, California, which specializes in income tax planning and tax compliance for individuals, corporations, partnerships, LLCs, trusts, estates and non-profit clients. The firm obtained its first medical cannabis client in 1998, and now has more than 150 clients in this field. Hank has held faculty positions at City College of San Francisco, Laney College and San Francisco State University, and he is regularly appointed by the Superior Courts of California as a forensic expert, business appraiser and referee in family law, civil litigation and tax matters. He has been continually involved in professional and community service, serving as past president of the East Bay Chapter of California Society of CPAs and as a current director on various non-profit boards.
- Henry Wykowski, Esq., is a San Francisco-based trial attorney representing numerous cannabis dispensaries in tax and litigation matters, including Harborside Health Center. He is widely considered to be one of the country’s leading authorities on taxation of the medical marijuana industry. Henry is a graduate of Tulane University School of Law and has been practicing for more than 35 years. He began his career in the Tax Division of the U.S. Department of Justice and also served as an Assistant U.S. Attorney in the Northern District of California. Henry was the tax attorney in the landmark case of Californians Helping to Alleviate Medical Problems (CHAMP) v. Commissioner, 128 T.C. No. 14 (2007). Henry currently serves on the board of the National Cannabis Industry Association, and he is actively engaged in the effort to exclude state-authorized dispensaries from Sec. 280E.