You're building a legal business inside an illegal tax code. That takes a different kind of finance team.

Section 280E of the Internal Revenue Code prohibits businesses that traffic in controlled substances from deducting ordinary business expenses like rent, payroll, and marketing on their federal tax return. The only deduction allowed is cost of goods sold (COGS), which makes proper COGS allocation the single most important tax strategy for any plant-touching cannabis operator and can mean the difference between a 70% effective tax rate and a 40% one.

Yes, but it requires working with banks or credit unions that have implemented cannabis-specific compliance programs, and availability varies by state. These institutions require extensive documentation including your license, operating agreements, financial statements, and often a third-party compliance review, so having clean books and a compliant financial infrastructure is a prerequisite for banking access.

Seed-to-sale reconciliation requires matching every unit of inventory in your state tracking system, such as METRC or BioTrack, to corresponding transactions in your accounting software on a regular basis. Discrepancies between the two systems create both compliance risk with your state regulator and financial reporting errors that affect your COGS calculation and 280E position.

Under 280E, cannabis companies can deduct direct costs of goods sold including raw materials, direct labor involved in production, and production-related overhead such as facility costs for cultivation or manufacturing space. The key is proper cost allocation methodology, and operators who work with a cannabis-specialized accountant typically recover significantly more allowable COGS than those using a general CPA who is not familiar with 280E case law.

Multi-state cannabis operators typically use a holding company structure with separate entities for each license type and state to isolate regulatory risk, optimize 280E allocations, and manage state-level tax obligations. The right structure depends on your license types, whether you have both plant-touching and non-plant-touching operations, and your long-term exit strategy, making entity planning one of the first things a cannabis CFO should address.