Journal:Accounting and the US cannabis industry: Federal financial regulations and the perspectives of certified public accountants and cannabis businesses owners
| Full article title |
Accounting and the US cannabis industry: Federal financial regulations and the perspectives of certified public accountants and cannabis businesses owners |
|---|---|
| Journal | Journal of Cannabis Research |
| Author(s) | Owens-Ott, G. Suzanne |
| Author affiliation(s) | Colorado Mesa University |
| Primary contact | Email: Send online message |
| Year published | 2020 |
| Volume and issue | 2 |
| Article # | 41 |
| DOI | 10.1186/s42238-020-00049-7 |
| ISSN | 2522-5782 |
| Distribution license | Creative Commons Attribution 4.0 International |
| Website | https://jcannabisresearch.biomedcentral.com/articles/10.1186/s42238-020-00049-7 |
| Download | https://jcannabisresearch.biomedcentral.com/track/pdf/10.1186/s42238-020-00049-7.pdf (PDF) |
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This article should be considered a work in progress and incomplete. Consider this article incomplete until this notice is removed. |
Abstract
Background: Cannabis-related businesses (CRBs), in states where cannabis is legal, may be unable to obtain professional financial services such as banking, insurance, and accounting because of federal laws and regulations. This qualitative study investigated the following research questions.
- 1. Why are some certified public accountants (CPAs) unwilling to provide services to cannabis-related businesses?
- 2. How do CRBs compensate for lack of CPA services?
- 3. What does a CPA need to know about the cannabis industry prior to engaging to provide services to CRBs?
Methods: Data for this grounded-theory qualitative study was gathered from twenty-three semi-structured phone and face-to-face interviews. Ten cannabis-related business owners were recruited from a convenience sample after attempting a broad recruiting effort. Thirteen CPAs with active licenses in Colorado or Washington State participated from firms of varying size and willingness to serve the cannabis industry. The individual interviews, which lasted from twenty minutes to more than an hour, focused on the participants’ perceptions of the complexities of accounting and tax compliance for cannabis businesses.
Results: Eight of the thirteen CPAs interviewed would not provide services to the cannabis industry with the primary reason given that cannabis is federally illegal. All ten of the cannabis business owners interviewed indicated they engage a CPA to provide tax services. Seven out of ten CRB participants and ten of the thirteen CPA participants indicated that extensive industry knowledge is needed for an accountant to competently provide services to a CRB.
Conclusions: CRB owners need to carefully consider the industry knowledge and experience of a potential CPA prior to engaging them. This study shows that U.S. CPAs should weigh the risk of federal prosecution and potential loss of the CPA license when deciding whether to serve a CRB client. The study also found that a CPA must commit to acquiring and maintaining substantial specialized knowledge related to tax Code Section 280E, internal controls for a cash-only or cash-intensive business, and the workings of the cannabis industry under the current regulatory conditions.
Keywords: cannabis, marijuana, accounting, business, certified public accountants, financial regulation, Colorado, Washington State
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Notes
This presentation is faithful to the original, with only a few minor changes to presentation. Some grammar and punctuation was cleaned up to improve readability. In some cases important information was missing from the references, and that information was added. The original article lists references in alphabetical order; this version lists them in order of appearance, by design.
