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Cannabis Farming
Taxes Involved with Cannabis Farming
Federal
At the federal level, cannabis is still classified as a Schedule I controlled substance. As a result, they're subject to Section 280E of the Internal Revenue Code. This section prohibits cannabis businesses from deducting most business expenses, except for the cost of goods sold (COGS).
So, while a typical business can deduct expenses like marketing, rent, and employee salaries, a cannabis farm can't. That's a pretty hefty tax burden.
State
On the state side, it's a different story. States that have legalized cannabis have their own tax structures, often including excise taxes, sales taxes, and sometimes additional taxes specific to cannabis. These can vary widely from state to state.
For example, California has a 15% excise tax on cannabis, while Washington State imposes a 37% excise tax.
Why Use a Farmer's Delaware Statutory Trust (FDST) for cannabis?
This is a game-changer for cannabis farms looking to optimize their tax situation.
By deferring taxes, farmers essentially get to keep more of their money "in-house" for a longer period. This extra cash can be reinvested into the farm—be it for new equipment, expanding acreage, or even diving into R&D for better strains of cannabis.
Since cannabis farming runs into extra taxes and fees while being unable to write off as much as other farmers, what is left to them? - To anyone who has experienced this, you know the pain.
1. Tax Efficiency
2. Reinvestment Opportunities
3. Profit Maximization
4. Compliance and Legitimacy
5. Financial Flexibility
$ Profit Maximization $
If a farmer is content with the size and scope of their operations, the FDST still offers a benefit: increased profitability. The money that would have gone to the IRS stays in the farm's coffers, allowing the farmer to pocket more of the profits. In the cannabis industry, where the market is booming but still somewhat volatile, having that extra profit can provide a safety net.
The FDST isn't a one-size-fits-all solution; it offers flexibility. Farmers can choose to either expand their operations or simply enjoy a larger profit margin. This adaptability is crucial in an industry like cannabis farming, where market conditions and regulations can change rapidly.
Compliance and Legitimacy
This is a game-changer for cannabis farms looking to optimize their tax situation.
By deferring taxes, farmers essentially get to keep more of their money "in-house" for a longer period. This extra cash can be reinvested into the farm—be it for new equipment, expanding acreage, or even diving into R&D for better strains of cannabis.
Since cannabis farming runs into extra taxes and fees while being unable to write off as much as other farmers, what is left to them? - To anyone who has experienced this, you know the pain.
Think of compliance and legitimacy as two sides of the same coin. One feeds into the other, creating a virtuous cycle that sets your cannabis farm apart in a crowded market. An FDST is the linchpin that connects these twin pillars. By being compliant, you add a layer of legitimacy to your operations. And when you're seen as legitimate, compliance becomes easier, attracting more investment and even influencing policy.
An FDST isn't just a financial tool; it's a strategic asset that fortifies both your compliance and your legitimacy, positioning your farm for long-term success.
Get Started With the Farmer's Trust!
It's a simple, quick process. Meet with us to see how the Farmer's Trust can help your farm!
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