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As more farmers, retailers and processors enter the booming cannabis market, a growing number of attorneys, insurance and financial firms are tailoring their businesses to specifically serve the niche cannabis industry. One of those is Adam Syvock, owner of Infinity Accounting, who started a separate entity, Cannabis Accounting LLC (W177 N9886 Rivercrest Drive, Suite 260, Germantown, Wis.) in 2018 to help cannabis-related businesses.
The idea for Cannabis Accounting was prompted by a friend of Syvock’s who had gotten a license to sell medical cannabis in Illinois. “He called me and asked if I knew how to do accounting for that particular industry,” Syvock says. “I told him I would research it.” He began educating himself on cannabis accounting, researching federal and state laws and tax codes.
Through Cannabis Accounting, Syvock serves industrial hemp farmers, cannabidiol (CBD) retailers, processors and extractors, as well as cannabis businesses in states where it is fully legal. He provides bookkeeping, accounting, tax preparation, planning, payroll services, financial advisory analysis and profit consulting. He also helps companies to think about and plan for long-term growth.
With cannabis being a specialized industry operating under a nationwide patchwork of continuously changing laws and regulations, Syvock notes it’s advantageous for cannabis businesses to have an accountant specifically for that industry. Regarding industrial hemp and CBD, as it applies in Wisconsin, Syvock will educate hemp farmers and processors on how to measure their yields and profitability.
Cash Flow
“In terms of CBD retail, we’ll manage their cash flow, because banking and credit card processing is still an issue,” he explains. “Some banks have opened their doors to welcome the hemp community, but we’re still in the infancy stages of that. I get them to think about cash ledgers; CBD retailers are still heavily reliant on cash in a lot of places, so I make sure they are accounting for their cash properly so if they are audited, everything is prepared and there will be no question marks.”
With medical or recreational marijuana, it’s a whole different ball game. Syvock cites the Internal Revenue Service’s (IRS) code, section 280E, which forbids businesses in that industry from deducting ordinary business expenses from income associated with “dealing or trafficking” of Schedule I or II substances defined under the Controlled Substances Act—including marijuana.
“That did also apply to industrial hemp, but under the 2018 farm bill, when industrial hemp was taken off the Controlled Substances list, it’s no longer subjected to 280E; but there are still some things in there [that affect industrial hemp],” he explains. “Also, nobody has ever received any guidance as far as what the Food and Drug Administration is planning on doing with CBD or hemp as a whole, so I can imagine that they are going to come out with regulations, guidelines and compliance portions. Another thing we help our legal cannabis clients with is to maintain their compliance and analysis sheets, keeping those more organized, so if there are any questions, we can answer them right away.”
Syvock spends a lot of time reading to keep up on the ever-changing cannabis industry. “There are eight to 10 court cases every year that have new implications on hemp, especially this 280E section. If the federal government were to make all cannabis legal today, there would be no issue with 280E, but since we’re not in that reality, businesses have to consider how they are going to account for that.” He notes some companies try to file standard tax returns or get around 280E, but if they get audited, that could result in penalties.
“What drew me to this is the challenge of it and the uniqueness of the industry in terms of the accounting portion of it,” he concludes.
For more information, visit facebook.com/cannaaccounting.
