Cannabis Business Accountants in Maryland

Key Points:

• Maryland Tax Rate: Cannabis retail sales in Maryland are taxed at 9%, collected by the Comptroller, while the general state tax rate is 6%.
• Cannabis, CBD, and Hemp: Cannabis businesses are limited to COGS deductions and must capitalize inventory under 471, while CBD and hemp are exempt from 280E with deductible expenses; hemp also avoids 263A if receipts are under $25 million.

With medical and recreational cannabis legalized in Maryland, demand for cannabis CPAs is rising.

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

Maryland Tax Rates

Cannabis businesses in Maryland are subject to a 9% sales and use tax on retail sales, which is managed and collected by the Maryland Comptroller's office. The general sales and use tax rate for Maryland is 6%.

Accounting Considerations for Cannabis, CBD, and Hemp in Maryland

Cannabis: Cannabis businesses face strict tax limitations. Internal Revenue Code Section 280E prohibits deductions of ordinary business expenses, allowing only the cost of goods sold (COGS), which impacts profitability and tax planning. Additionally, IRC Section 471 requires capitalization of direct and indirect costs into inventory. Applying these inventory accounting rules effectively is essential to maximize COGS deductions and comply with tax regulations.

CBD: CBD products derived from hemp with less than 0.3% THC are legal under the 2018 Farm Bill, so CBD businesses are not subject to IRC Section 280E and can deduct ordinary business expenses, including COGS, like other non-cannabis businesses. While they are exempt from stringent inventory accounting rules, CBD businesses should implement strong accounting systems to manage inventory, track expenses, and ensure compliance with state and federal regulations.

Hemp: Hemp businesses must follow inventory costing methods under IRC Section 471, capitalizing direct and indirect production costs. They are exempt from IRC Section 263A's uniform capitalization rules if their average annual gross receipts are $25 million or less for the previous three tax years.

Qualities to Seek in a Cannabis CPA

Someone with deep expertise in cannabis tax and compliance, as well as experience in the industry with references to match. They should understand seed-to-sale tracking and be capable of integrating data into financial reports.

Accounting Considerations for Cannabis, CBD, and Hemp in Maryland

Cannabis: Cannabis businesses face strict tax limitations. Internal Revenue Code Section 280E prohibits deductions of ordinary business expenses, allowing only the cost of goods sold (COGS), which impacts profitability and tax planning. Additionally, IRC Section 471 requires capitalization of direct and indirect costs into inventory. Applying these inventory accounting rules effectively is essential to maximize COGS deductions and comply with tax regulations.

CBD: CBD products derived from hemp with less than 0.3% THC are legal under the 2018 Farm Bill, so CBD businesses are not subject to IRC Section 280E and can deduct ordinary business expenses, including COGS, like other non-cannabis businesses. While they are exempt from stringent inventory accounting rules, CBD businesses should implement strong accounting systems to manage inventory, track expenses, and ensure compliance with state and federal regulations.

Hemp: Hemp businesses must follow inventory costing methods under IRC Section 471, capitalizing direct and indirect production costs. They are exempt from IRC Section 263A's uniform capitalization rules if their average annual gross receipts are $25 million or less for the previous three tax years.

Qualities to Seek in a Cannabis CPA

Someone with deep expertise in cannabis tax and compliance, as well as experience in the industry with references to match. They should understand seed-to-sale tracking and be capable of integrating data into financial reports.