We have been hearing a lot recently about how banks and payment processors cannot easily offer services to cannabis-based businesses in states where medical and recreational cannabis have been legalized. It has not been an easy row for financial service providers to hoe. Things have been equally difficult for certified public accountants (CPAs). But they are starting to figure out how to serve cannabis businesses without putting themselves in jeopardy.
Industrial hemp is now legal around the country. Marijuana is not. Both hemp and marijuana are cannabis plant species. The difficulty with marijuana is that it remains a Schedule I controlled substance. Federal authorities have the ability to take enforcement action against any companies that deal in marijuana or THC-derived products – including CPAs who provide services to cannabis businesses.
CPAs have also been forced to deal with the ethical implications of serving customers involved in the cannabis space. While they may or may not be personally opposed to medical and recreational marijuana, is it okay for them to violate federal law to serve customers?
● Know the Laws in Each State
The Journal of Accountancy’s Teri Saylor wrote a piece in November 2021 offering advice to CPAs looking to take on cannabis clients. Saylor discussed a number of tips, including knowing the laws in each state in which a CPA does business. There is enough variation in state law to create some confusion.
For example, Oregon allows both medical and recreational use. Utah is a medical-only state. Oregon licenses hundreds of dispensaries throughout the state. Utah law allows for only fourteen medical cannabis pharmacies. Pure Utah, in Payson, is one of them.
The point of this is to say that CPAs should ensure that any cannabis clients they take on are adhering strictly to the laws in their respective states. As long as this is the case, it’s unlikely the federal government will take enforcement action against an accounting firm. But if a CPA is serving a client in violation of state laws, trouble awaits.
● Understand the Industry
Saylor also recommends that CPAs take the time to understand the industry. They need to understand the differences between hemp and marijuana. They need to know the legal limits of THC. They need to understand the finer points that distinguish medical cannabis from recreational use. Those finer points cover everything from taxation to inventory control.
Understanding an industry is common practice among CPAs. It is even more important in the cannabis space, given the conflict between federal and state laws. CPAs are better off armed with as much knowledge as they can get.
● Additional Tips for CPAs
Saylor goes on to offer additional tips this post lacks the space to discuss in detail. Here they are in condensed form:
- Beware of Cash – Cannabis businesses in most states still operate on a strict cash basis thanks to a lack of financial services. CPAs need to be very careful about moving large quantities of cash.
- Practice Due Diligence – CPAs are advised to practice due diligence in every aspect, including making the list of provided services abundantly clear. Both they and their cannabis clients need to fully understand the ground rules for service.
- Trust One’s Instincts – Saylor advises that CPAs trust their instincts when dealing with cannabis businesses. If something doesn’t seem right, a CPA should be cautious.
CPAs wanting to serve cannabis businesses have no shortage of opportunities. But doing so remains dicey due to marijuana’s ambiguous legal status. Perhaps that will change in the future. But for now, CPAs should be extra diligent in the cannabis space.
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