The ERC Experts for The Cannabis Industry

Cannabis businesses that experienced fully or partially suspended operations due to pandemic-related governmental orders still have the opportunity to access cash relief in a refundable employee payroll tax credit—the Employee Retention Credit (ERC).

The ERC, as a payroll tax credit, does not implicate Internal Revenue Code §280E—which prohibits cannabis businesses from deducting ordinary business expenses from gross income. Rather, the ERC is a payroll tax credit which results in a refund on the employer’s Form 941. With credits often exceeding the initial payroll tax liabilities themselves, the ERC has already awarded millions of dollars to a broad spectrum of employers, including cannabis businesses.

Launched in March 2020, the ERC remains one of the biggest cash relief opportunities—up to $26,000 per employee during 2020 and 2021—available to businesses that have been negatively impacted by the COVID-19 pandemic. And even for those businesses already beginning to recover, employers can retroactively claim the ERC based on hardships experienced during 2020 and the first three quarters of 2021.

Employers should also remember that cannabis businesses that started up after February 2020 may qualify under specific ERC provisions that can provide up to $100,000 in refundable credits in 2021.

Another advantage to the ERC is it DOES NOT COUNT AS INCOME, meaning you do not pay any tax on funds received. The ERC is a refundable payroll credit, meaning the IRS issues a qualifying cannabis business a check or deposits funds straight into the bank account they have on file.

Qualification for the ERC is through either one of two factors:

1. Full or partial suspension of business operations as a result of a government order. Commons examples include, but are not limited to:

• capacity limitations on the number of individuals in their waiting or service
• orders prohibiting “deli-style” sales
• orders prohibiting sniff jars
• orders permitting only curbside transactions and delivery
• mandated time-consuming disinfecting procedures.

2. The business suffered a significant decline in revenue:

• Tax Year 2021 (Quarters 1, 2, and 3) – Employer is eligible if business’s gross receipts are more than 20% down from the gross receipts in the same calendar quarter of 2019.
• Tax Year 2020 (Quarters 1 through 4) – Employer is eligible if business’s gross receipts are more than 50% down from the gross receipts in the same calendar quarter of 2019.

As a cannabis business, we know anything to do with taxes and federal regulation can be anxiety-inducing, to say the least. You need a partner with credit expertise within the cannabis industry. We have helped dispensaries, cultivators, breeders, extractors, manufacturers and other plant touching clients claim millions of dollars with the Employment Retention Credit.

We will work with eligible cannabis businesses by reviewing the relevant financial records to calculate the dollar amount of the expected credit.

Our talented team will complete and file the relevant IRS forms on the eligible employer’s behalf and prepare and retain all backup-related documentation. Rest assured, you are in good hands.