As a cannabis business owner, you know the industry’s unique financial challenges—from stringent regulations to complex tax codes. Yet, with the right accounting practices, it’s possible to not only stay compliant but also maximize profitability. Here, we’ll explore key strategies for managing expenses, ensuring IRS compliance, and understanding allowable deductions under 471-11 accounting, which is essential for companies operating in this space.

A detailed breakdown of allowable and disallowed expenses for cannabis businesses under IRS §280E and §471-11, with a focus on how cultivators, processors, and dispensaries are affected differently. The following sections clarify the types of direct and indirect costs that each type of cannabis business can include in Cost of Goods Sold (COGS) and outlines the unique restrictions placed on dispensaries.