Marijuana is currently illegal on the federal level. However, an ever-increasing number of states have legalized marijuana for medical or recreational use. State laws lay out the framework for regulating the marijuana industry. As a result, there are compliance burdens on the federal, state, and local level. You avoid the most serious problems, it is important to have proper guidance while navigating this complicated area of the law. Whether you need an expert to help you enter the industry or if you are already an operational business in the space and need consultation we are here to assist. We handle each step of the process, from working with your team to draft the application, challenging agency action (if needed), business structuring, tax planning, and consulting to keep your business compliant. Our team of attorneys has extensive experience in the marijuana, cannabis, CBD, tobacco, and hemp space. Coupled with our years of successful practice in federal and state and local tax as well as administrative law, our firm is the perfect fit to help your business succeed in the industry.
Marijuana Business License (Cultivate, Process, Dispense)
The type of licensing required for a cannabis business depends on the state (and sometimes county) as well as the type of business conducted. The nuances make it essential to have a marijuana attorney on your side. For example, a business that cultivates cannabis may require different licensing and permits than a business operating a dispensary. However, in some states, such as Florida, the entire process is vertically integrated, meaning the same business cultivates, dispenses, and delivers cannabis, with a single license. We can help you to interpret and apply the laws as well as write an application for your business to apply to the state to cultivate, process, or dispense marijuana.
In every state where cannabis is legal, there has been an eruption of lawsuits on the issue, primarily filed by businesses seeking marijuana business licenses. As the licenses are granted are limited, and considered very valuable, the license grant process is competitive. If you want to secure a license it is critical to have a cannabis attorney on your team from the onset. Generally, businesses that are denied licenses have an opportunity to challenge state and local agency decisions and possibly receive a license through the administrative litigation process. If you are interested in entering the cannabis industry and need help applying for the proper licenses or if you have been denied a license, our firm can help you challenge agency action through the administrative court process.
Administrative Litigation for Applicants/License Holders
If you are an applicant or marijuana license holder and need help with resolving an administrative issue, our team of attorneys can help you. Depending on the state where your marijuana business operates, you need to act fast to protect your license or appeal a license denial. Typically, notices from government agencies include deadlines to act and require you do so using a specified format and procedure. Our administrative law team, that does extensive work in the cannabis industry, can help you respond to any notice in an effective and timely manner. In most instances, you have the right to challenge what the government proposes to do if you exercise that right in a timely fashion. Each case is different, but our team is experienced and well equipped to guide you through the informal and formal process to protect your rights.
Cannabis Federal Tax Compliance/Audits
Cannabis businesses face a challenging tax scheme on both the federal and state level. Unlike a typical business, cannabis businesses are unable to deduct ordinary and necessary business expenses under Section 280E, I.R.C. Section 280E disallows deductions for businesses trafficking in Schedule I or II controlled substances. Enforcement of Section 280E can result in unmanageable tax liabilities. However, with proper planning, there are several ways to take advantage of other deductions to ultimately reduce the businesses tax liability.
As stated, the tax compliance burden can be overwhelming, as even one mistake can result in serious consequences. Our lawyers have extensive experience in tax law and the emerging marijuana industry and we can help you formulate, understand and, if needed, defend your tax position. If you are in the cannabis industry and would like more information on the tax implications of operating a cannabis business or are facing a state tax or IRS audit, we are here to help. Working with one of our cannabis tax attorneys will allow you to protect yourself, as well as ensure that you receive the proper tax treatment.
Cannabis State and Local Tax Compliance/Audits
In addition to IRS audits, state cannabis audits are also complex, and common. Further, because many cannabis businesses have several entities intertwined, the state often audits all related entities. Moreover, as the state licenses are granted, the license that enables the business to operate is potentially at risk. State audits focus on records regarding sales and use tax, excise taxes, privilege taxes and property taxes. Further, there are often multiple layers of taxes that apply at the state level, including cannabis taxes passed on from the cultivator to the wholesaler to the end user as well as county taxes. Not all states take a multi-tiered approach to taxing the cultivation and sale of cannabis, but it is becoming more common. Our cannabis attorneys will work with you to ensure that the audit is fairly conducted.
State and local governments are grappling with how to audit this new industry, oftentimes applying a trial and error process. Further, as this is a new industry, the laws are volatile and change frequently. As a result, staying in compliance with state laws without overpaying takes proper planning as well as competent representation in the event of an audit. There are plenty of details that can go overlooked unless you have the right people looking out for you. You can feel powerless when you are subject to ambiguous or vague tax laws. Our team of marijuana lawyers coupled with our experience in the administrative law and tax fields make us the perfect fit not only do a detailed review of your records, but also to argue aggressively on your behalf.
Localities Banning Cannabis Businesses
In many states, although marijuana is legal on the state level, the laws give local governments the authority to ban marijuana cultivation and dispensing facilities. Further, multiple localities have either enacted moratoriums, bans, or chosen to allow dispensaries, but have strict ordinances that are difficult to comply with. Unfortunately, localities that welcome the medical marijuana dispensaries with open arms are limited. It is important for cannabis businesses to understand that these ordinances can be challenged, as typically local governments overstep the power granted to them.
Property Appraisers Taking Away Greenbelt/Agricultural Exemption for Cannabis Cultivators
Ad valorem or property taxes are imposed at the county level in most states. As a result, the cannabis industry has provided new challenges to county property appraisers and taxpayers. Individual county property appraisers have broad authority within their respective counties and varying interpretations of those powers has created an unstable environment for cannabusinesses when it comes to ad valorem tax exposure. As a result, there are many grey areas concerning property valuation, possible exemptions and taxation rates. Cannabusinesses should take several factors into consideration to try to minimize property tax exposure and also be aware that they have the ability to appeal unjust property tax valuations and assessments.
Most states have laws in place that provide for agricultural property exemptions. These laws provide for exemptions from tax for agricultural land. These laws are typically broad and inclusive, and leave the authority to the appraiser to determine whether marijuana cultivation falls within the agricultural exemption. The agricultural exemption is one area of property tax that already has and will continue to be an issue for both the property appraisers and cannabusinesses that will remain in flux as the law develops.
With the passage of the 2018 Farm Bill, hemp is now considered an agricultural commodity. The Farm Bill defines hemp as cannabis with a 0.3 percent THC (tetrahydrocannabinol) or lower. The 2014 Farm Bill allowed for hemp to be cultivated under pilot programs that were approved by the state departments of agriculture to cultivate, study, and eventually commercialize hemp. The 2018 Farm Bill expands on this by allowing hemp cultivation outside of the pilot programs and explicitly allows hemp-derived products to cross state lines. However, there are still regulations and hoops to jump through to legally cultivate, process, and sell hemp and hemp derived products. It is important to be compliant with the new Farm Bill (which includes regulatory power for the USDA and FDA) as well as state and local laws that apply to hemp cultivation and commercialization. As a result, you should consult a knowledgeable attorney before entering the market. If you already are involved in the hemp industry, it is important to understand how the new Farm Bill affects you and your business.
CONTACT US TO DISCUSS YOUR CASE