Today's Technology for Tomorrow's Firm.
Issue link: https://cpapracticeadvisor.epubxp.com/i/571003
September 2015 • www.CPAPracticeAdvisor.com 17 those plants. Businesses selling legal recreat iona l ma r ijua na i n A lask a aren't likely to open until 2016, afer a regulatory system is put into place by the state legislature. A s you can see in these projec- tions by the Marijuana Policy Group in their report, sales are projected to increase every year, while the price per gram goes down each of those years. Colorado Legal recreational marijuana went i nto ef fec t i n 2 012 i n Colorado. According to this Ta x Foundation ar ticle, the ta x str ucture is as fol- lows: 15 percent excise ta x on the "average market rate" of wholesale marijuana, plus a 10 percent state tax on retail marijuana sales, plus the state sales ta x of 2 .9 percent, plus local sales taxes, plus local marijuana ta xes. In Denver, for example, the local marijuana tax is 3.5 percent, so a $30 eighth of pot (1/8 oz.) w i l l have about $8. 59 in ta xes tacked onto it, or about a 29 percent overall tax rate. Te article goes on to state that in t he f i r st si x mont h s , le ga l ret a i l m a r i j u a n a s a le s a m a s s e d $ 21. 8 m i l l ion in ta x revenue, as wel l as $10.1 million in ta xes on medical marijuana in that same timeframe. Oregon In Oregon, adults 21 or older can possess up to an ounce, or roughly 28 joints, in public, as well as eight o u n c e s i n t h e i r h o m e s . A n d , accord i ng to a n a r t ic le, O re gon marijuana will be grown, processed and sold sometime in 2016 at facili- ties that are licensed, regulated and inspected by the state. Washington State Like Colorado, Washington State also saw legal recreational marijuana go into efect in 2012. Teir taxes are hef t ier, w it h a 25 percent ta x on p r o d u c e r s a l e s t o p r o c e s s o r s , another 25 percent tax on processor sales to retailers, and a f urther 25 percent tax on retailer sales to cus- tomers. Add to this the state Busi- ness & Occ upat ion (B&O;) g ross receipts ta x, state sa les ta x of 6. 5 percent a nd loca l sa les ta x . T h is results in a total efective tax rate of about 44%, according to Moody's. T he ta x fou ndat ion a r t icle h ig h - lighted the quick gains generated from legal Cannabis in Washington, as well as astounding projections for future years: • In the frst month, there were $3.8 million in sales and around $1 million in tax revenue. • Te Washington State Liquor Control Board, in charge of the program, estimates that marijuana tax revenue for the 2015-17 will hit $122,459,893, and $336,898,396 for 2017-19. Creating a Niche Practice T h i s r e m a r k a ble g ro w t h i n t he Cannabis industr y is creating new doors for accountants, according to R ic k Te l b e r g 's C PA Tre nd l i ne s a r t i c l e ( h t t p ://c p a t r e n d l i n e s . com/2015/05/19/cannabiz-bv ). Te article highlights some of the many a reas CPA s a nd accou nta nts ca n he lp i n t h i s i ndu s t r y, i nc lud i n g book keeping, internal control, ta x accounting and preparation, man- agement, holding companies, and general business council. Te article a l so of fer s que st ion s to a sk a nd issues to address when it comes to having clients in the legal marijuana business. Telberg touches on three oppor- t u n it ie s o f t he b u s i ne s s , w he r e accountants are needed right away. Fi r s t , t he se bu si ne s se s a re ne w, mak ing a valuation paramount for purposes of sale. Second, with these bu si nesses bei ng loc a l ly lega l i n some st ates but federa l ly i l lega l o v e r a l l , l e g a l i t y i s a b i g i s s u e . Terefore, banks, investors, buyers a nd ot her s t a k eholder s ne e d a n accurate estimate of the value of the business, an area that calls for your s k i l l s a nd e x per t i s e . T h i rd , t he people who run and own the busi- n e s s e s n e e d a s s i s t a nc e w he n i t comes to calculating their values, so they need business consultants who can help them with this. W it h oppor t u n it y a nd g row t h comes risks, complexities and more. You will need to decide if working in this industry is practical for your practice, of course, but if you have a niche practice like this, is it going to be good for refer ra ls to and f rom other clients? As evidenced by the statistics and state-by-state explana- tions in this article, it is perfectly legal. Webb Stevens is head of Product at Avalara. With more than 12 years' experience in the fnance industry, he is recognized for his ability to build relationships, analyze information and develop new opportunities. On weekends, you'll fnd Webb compet- ing in ultra-endurance challenges. Contact him at webb.stevens@ avalara.com . A Year in the Life of a SALT Accountant is sponsored by Avalara c c o u n t a n t b y A v a l a r a 2 9 e g o e s t s i x m o n g o e s i x m o n o Colorado Tax and License Collections from Marijuana Sales, 2014 ($ thousands) Jan Feb Mar Apr May Jun Total 15% Wholesale Tax 195 339 609 734 1,135 969 $3,983 10% Retail Tax 1,401 1,434 1,898 2,217 2,070 2,473 11,496 2.9% Sales Tax Medical 913 1,022 999 919 927 830 5,612 Retail 416 438 569 639 642 700 3,406 Licenses Medical 496 754 794 822 867 1,040 4,573 Retail 96 103 108 139 72 507 2,932 Total 3,519 4,092 4,980 5,273 5,715 6,522 32,002 Note: Retail license total includes $1.95 million in starup revenue collected prior to January. Totals may not sum due to rounding. Source: Colorado Department of Revenue.