FAQs
Cannabis Accounting Questions and Answers
Common questions about engagements, federal tax treatment, and the regulatory and tax structure that applies to licensed cannabis businesses in Michigan.
Working With the Practice
- What does an engagement typically include?
- Most engagements include monthly bookkeeping and close, reconciliation of inventory and monitoring-system activity, financial statements, and annual tax preparation. Advisory and project work is added as needed.
- Do you work with operators who already have a bookkeeper?
- Yes. A common structure is in-house daily entry with our review, reconciliation, inventory costing, and reporting on a monthly cycle.
- How is pricing determined?
- By scope: license types, transaction volume, number of entities, and the condition of current records. Pricing is provided in writing before work begins.
- Do you serve pre-license applicants?
- Yes, primarily on financial modeling, entity considerations with your counsel, and setting up accounting before operations begin.
Regulation and Tax in Michigan
- Which agency regulates cannabis businesses in Michigan?
- The Cannabis Regulatory Agency administers licensing and regulation for the adult-use program under the Michigan Regulation and Taxation of Marihuana Act and the medical program under the Michigan Medical Marihuana Facilities Licensing Act.
- What taxes apply to adult-use retail sales in Michigan?
- Adult-use retail sales are generally subject to a 10% excise tax in addition to the 6% state sales tax, while qualifying medical sales are treated differently. Confirm current rates and categories with the Michigan Department of Treasury.
- Do local governments affect cannabis operations in Michigan?
- Yes. Municipalities decide whether to allow cannabis establishments and may impose their own permitting requirements, so obligations vary by community.
- How does seed-to-sale reporting work in Michigan?
- Licensees record inventory activity in the statewide monitoring system. Keeping accounting records reconciled to those reports supports both inspection readiness and accurate financial statements.
Accounting and Tax Technical Questions
- Does Section 280E still apply to state-licensed businesses?
- Section 280E is federal law and applies to businesses trafficking in a federally controlled substance regardless of state licensure. Any change in federal law or scheduling would need to be evaluated when it occurs.
- What is the most common accounting gap you see?
- Missing departmental coding. Without it, cost allocation becomes a year-end estimate rather than a record supported by the ledger.
- How quickly can books that are behind be brought current?
- It depends on the number of periods and record quality. A short diagnostic gives a realistic timeline before catch-up work begins.
- Do you guarantee tax savings or audit outcomes?
- No. We apply the applicable rules to documented facts and prepare records that can be explained. We do not promise savings, deductions, or particular examination results.
Related Resources
280E Explained
A plain-language explanation of Internal Revenue Code Section 280E, what it disallows, and how inventory costing determines recoverable cost.
Read moreCannabis Accounting Guide
A practical guide to accounting for licensed cannabis businesses: chart of accounts, inventory costing, reconciliation, and monthly close.
Read moreBookkeeping Guide
Daily, weekly, and monthly bookkeeping routines for licensed cannabis businesses, with reconciliation checklists and coding standards.
Read moreDiscuss Your Operation With a Cannabis Accounting Specialist
Call to talk through your license types, current records, and reporting needs, or schedule a consultation at a time that works for your team.