Massachusetts Cannabis CPA & Tax

Massachusetts Accounting & Tax for Cannabis

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Massachusetts Cannabis Accounting

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FAQ

What are the consequences of filing your MA tax return late, failing to file/pay the tax, and/or underpaying the appropriate tax amount?

Penalties and interest will be applied to any late filings as provided for by Massachusetts law. You may be held personally liable for failing to pay taxes, and if the state believes that it was done intentionally, they could file tax evasion charges against you. Tax evasion is a felony in Massachusetts, punishable by up to five years in prison and hundreds of thousands of dollars in fines.

Are business expense deductions allowed for marijuana businesses?

While Massachusetts legalized the licensed sale of marijuana, marijuana remains federally classified as a Schedule I controlled substance and is illegal to traffic under Federal Law. Under Internal Revenue Code § 280E, trade or businesses that traffic in controlled substances are prevented from claiming any trade or business deductions provided by the Internal Revenue Code, other than for the cost of goods sold. Because Massachusetts generally follows the trade or business deductions provided by the Internal Revenue Code, businesses engaged in marijuana-related activities may not deduct trade or business expenses for Massachusetts business tax purposes either.

Is medical marijuana subject to tax?

In general, a sale of medical marijuana to a purchaser is not subject to tax, as long as the purchaser presents his or her Medical Use of Marijuana Program ID Card and valid government-issued identification at the time of sale. In addition, the marijuana retailer must verify at the time of sale that the purchaser is certified and registered with the Massachusetts Cannabis Control Commission. Sales of medical marijuana should not be reported on the marijuana tax return. 

What kind of business license can I apply for?

The following license types are available:

  • Craft Marijuana Cooperative
  • Delivery-Only
  • Independent Testing Laboratory
  • Marijuana Cultivator
  • Marijuana Microbusiness
  • Marijuana Product Manufacturer
  • Marijuana Research Facility
  • Marijuana Retailer
  • Marijuana Third Party Transporter
  • Marijuana Transporter with Other Existing Marijuana Establishment License
  • Medical Marijuana Treatment Center
  • Microbusiness Delivery Endorsement
  • Standards Testing Laboratory
When do I register on MassTaxConnect now that I have my cannabis license?

When you receive your Notice to Commence Operations from the CCC, you will register for marijuana retail taxes on MassTaxConnect. We suggest you wait to register until you have this final document, and are ready to begin selling product, as a tax filing expectation will be triggered once you do register.

However, if you have employee withholding taxes prior to selling retail products, you will want to register to file returns and pay withholding tax.

Do you need to be licensed to sell Cannabis products in Massachusetts?

Yes. You must first obtain a license in order to sell cannabis for adult recreational use in Massachusetts.

You will need to register with the Cannabis Control Commission and the Department of Revenue. You will begin the process by requesting a Certificate of Good Standing (A certificate certifying that all tax liabilities have been met, in order to obtain financing, sell your business, renew licenses, or enter into other business transactions).

Once registered, you will be able to begin selling cannabis products. The licensing process takes approximately 90 days to complete. Once registered, you will then be obligated to pay taxes to the Massachusetts Department of Revenue by the 20th of each month.

What are the mandatory and/or optional taxes imposed on the sale of adult-use cannabis in Massachusetts?

Cannabis sales are subject to the following taxes in Massachusetts:

  • A state sales tax of 6.25%
  • A state excise tax of 10.75%
  • A local sales tax of up to 3%

While the state taxes will be the same no matter where you are located, you will need to know whether a local tax applies and what rate is being charged. 

Only the sale of marijuana will be taxed at these rates. Any other goods sold by your business will be taxed at the ordinary retail sales tax rates. 

These taxes do NOT apply to sales of cannabis to registered medical marijuana patients.

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