Cannabis Business Accountants in New Mexico

Key Points:

• Taxation: Recreational marijuana in New Mexico has a 5.125% sales tax and a 12% excise tax (increasing annually), while medical cannabis is excise-exempt and eligible for GRT deductions.
• Essential Services: Compliance, oversight, risk management, and tax planning.

What Does a Cannabis CPA Do

Cannabis CPAs, specialized in the industry's financial and tax regulations, help New Mexico businesses stay compliant while managing profitability challenges.

• The Cannabis Control Division (CCD) under the New Mexico Regulation and Licensing Department (RLD) has approved around 3 thousand licenses, which includes 400 licenses for producers, 675 for micro-producers, 900 for manufacturers, and over 1,000 for retailers.

• Are you a New Mexico-licensed CPA offering services to cannabis-related businesses? Request to be listed .

Taxation in New Mexico

New Mexico applies a 5.125% sales tax on recreational marijuana, plus a 12% excise tax, increasing by 1% annually until it reaches 18% in 2030. Medical cannabis is exempt from excise tax and eligible for Gross Receipts Tax (GRT) deductions as a prescription drug. The GRT for general goods and services varies from 5.125% to 8.6875%, depending on location.

Accounting Variances: Cannabis, CBD, and Hemp

Cannabis: Subject to IRC Section 280E, cannabis businesses face restrictions on tax deductions, necessitating precise inventory accounting under IRC Section 471 to reduce taxable income. Compliance with both federal and state regulations is complex and requires specialized support.

CBD and Hemp: These businesses enjoy standard business deductions as they aren’t subject to IRC Section 280E. While still following IRC Section 471 for inventory, they have a simpler compliance process compared to cannabis businesses.

Essential Services Provided by Cannabis Accountants

• Adherence to Regulations: Cannabis accountants ensure compliance with licensing and reporting mandates set by the New Mexico RLD, promoting regulatory adherence.
• Effective Financial Oversight: Recognizing the unique needs of cannabis businesses, accountants provide accurate financial reporting, inventory control, and cost management strategies.
• Proactive Risk Management: Accountants evaluate potential risks, establish internal controls, and apply anti-fraud safeguards to protect financial assets.
• Clear Financial Reporting: Accountants prepare financial statements according to Generally Accepted Accounting Principles (GAAP), enhancing transparency for stakeholders.
• Optimized Tax Planning: Leveraging knowledge of cannabis tax regulations, accountants maximize deductions and credits, reducing tax obligations within legal limits.

Tailored Services for Cannabis Enterprises

Cannabis businesses must navigate IRC Section 280E to manage tax obligations, which limits federal deductions. Strict inventory controls are vital for regulatory compliance and stock management, while banking restrictions necessitate precise cash management. Additionally, frequent reporting to state and federal agencies requires regulatory expertise to ensure smooth, compliant operations.