We have extensive experience handling Section 280E audits between a Taxpayer and the IRS. We also have extensive experience consulting taxpayers on how to structure a business, as well as the tax returns, to be 280E compliant while also receiving the most costs of goods sold.

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Based on our personal experience with the IRS, we have been able to create a spreadsheet showing the potential tax liability of a cannabis entity subject to 280E. This projection is based on the assumptions that (1) the IRS allows the entity to take the COGS as filed on the returns; (2) the IRS allows the entity to take COGS of eighty-five percent (85%) of gross sales; (3) the IRS allows the entity to take COGS of seventy percent (70%) of gross sales; (4) the IRS allows the entity to take COGS of fifty percent (50%) of gross sales; and, (5) the IRS allows the entity to take COGS of thirty percent (30%) of gross sales.

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The spreadsheet is helpful in illustrating how to structure a business tax return and what a potential 280E liability could look like if the entity is audited.