Managing Director & CEO of integrated transactional financial advisory, tax, and technology consulting firm - aBIZinaBOX Inc
New York, Chicago, and OaklandCPA.CITP.CISM.CGEIT.CGMAExpertise with: Alt. Investments/Private Equity, Real Estate, Professional Services, CA Cannabis, Tech Start-Ups and Distressed Assets/DebtTechnology Certifications including:Advanced & High Complexity Cloud Integrator
AICPA PCPS, CAQ,, IMTA, CITP
ISACA CGEIT, CISMState CPA Societies in California, Florida, Illinois, New York and TexasExpertise with Regulatory Compliance - US - HIPAA, FINRA, SEC Rule 17(a)(3)/(4), eDiscovery, FINCEN - EU- EBA, ESMA, EIOPA UK - BoE, PRA, FCA
Canada Plans Tracking Cannabis Users use social media as evidenced by its issuance of a public tender for services.
The Canadian government is seeking a company that will scour social media and the dark web for data on Canadians’ use of cannabis. The request comes just weeks before recreational pot use becomes legalized on October 17.
According to a tender posted by Public Safety Canada this week, the government wants a company to algorithmically scan Twitter, Tumblr, Facebook, Instagram, and “other relevant microblogging platforms” for information on Canadians’ attitudes towards legal pot and their behaviors.
The initiative will look for self-reported usage patterns (how much, what kind, and where) and activities such as buying and selling weed. The government will also be scanning social media for “criminal activities associated with cannabis use”—driving under the influence, for example. The initiative will also capture metadata, such as self-reported location and demographics, but according to the tender the data “must exclude individual unique identifiers.”
“Exploring public perceptions of cannabis use and related behaviors is key to developing a better understanding of how best to communicate to the general public about the risk of use and engaging in certain behaviors,” Public Safety Canada spokesperson Karine Martel wrote Motherboard in an email.
Martel did not comment on whether information on cannabis-related crimes collected from social media will be shared with law enforcement, but noted that the work will be conducted in compliance with the Tri-Council Policy Statement: Ethical Conduct for Research Involving Humans. This statement says that research focusing on topics that include illegal activities depends on promises of strong confidentiality to participants.
According to a second tender, also posted this week, the feds are also looking to keep track of Canadians buying and selling weed on so-called dark web markets. Such markets are only accessible through the encrypted Tor browser and payment is most often made using cryptocurrencies such as Bitcoin or Monero.
The initiative aims to analyze cannabis transactions and search forums as well as vendor and buyer profiles. The goal is to estimate the size of the digital black market for cannabis in Canada and to form an effective policy.
SF Cannabis Consumption Permit Regs have been released for public comment.
Cannabis Consumption Permits
The San Francisco Department of Public Health (SFDPH) is seeking public comment on the Proposed Rules and Regulations for Cannabis Consumption Permits. The SFDPH has developed these Rules and Regulations to ensure that each business owner of a storefront retail location and the public are aware of the process of requesting a permit and the operating standards required to comply with the permit. As the owner of the business and the member of the public, we are seeking your input to ensure that the guidelines are clear and transparent.
The public comment period will be 30 days, from September 21, 2018, through October 21, 2018.
Attn: Cannabis Program 1390 Market St. Suite 210 San Francisco, CA 94117
Verbal comments will be heard at a public meeting on October 3, 2018 at 101 Grove Street, Room 300 from 2:00 pm to 4:00 pm.
Medical Cannabis Dispensary Permits
On January 5, 2018, Article 16 of the San Francisco Police Code went into effect in the City and County of San Francisco. Article 16 establishes a regulatory and permitting scheme for cannabis businesses. Also on January 5, 2018, amendments to Article 33 of San Francisco’s Health Code went into effect. Article 33 regulates medical cannabis dispensaries and will remain in effect until December 31, 2018.
The following changes were made to Article 33:
Starting January 1, 2018, a person may not file and the Department of Public Health may not accept an application for a medical cannabis dispensary permit.
A cooperative or collective that distributes cannabis to more than 10 persons during any consecutive 30-day period will be presumed to have 10 or more members and will require a permit under Article 33.
A medical cannabis dispensary must be operated from a fixed place of business. It may not be operated out of a bus, truck, car, van, or any other mobile location or location that is capable of being mobile.
Starting January 5, 2018, a medical cannabis dispensary that meets the eligibility criteria in Section 3322 of the San Francisco Health Code and receives authorization from the City and County of San Francisco and the State of California may Sell Adult Use Cannabis and Cannabis Products for a period of 120 days.
Starting April 1, 2018, medical cannabis dispensaries in San Francisco were no longer authorized by Article 33 to engage in the cultivation of cannabis.
The Department of Public Health will continue processing permits for businesses who submitted their applications prior to January 5, 2018. If you have any questions, please send an email to [email protected]
Gumballs Trump Don’t Knows – Hilary Bricken Esq. of Harris Bricken recently published “Top Seven Deadly “Don’t Knows” for California Cannabis Businesses”
1. Cannabis banking–when?. We’re all familiar with the cannabis banking epidemic. As a result of current federal laws, in certain states securing a bank account is nearly impossible (though in some states, banking is readily available because of the 2014 FinCEN guidelines).
2. Provisional licenses. There’s a sinister deadline looming for all temporary licensees. Namely, after December 31, 2018, no more temporary licenses will issue to any cannabis businesses. I
3. Local control. Before you can receive a state temporary license, you must first show the state that you have the local approval of your city or county to operate within their borders.
4. CBD. CBD derived from industrial hemp in California is nothing short of a complete enigma. Essentially, California is following the FDA lock-step on its treatment of hemp-CBD under federal laws.
5. Corporate versus cottage interests. The express intent of Prop. 64 was to hoist up and protect cottage interests in the cannabis industry.
7. Enforcement of rule violations. Temporary cannabis licenses began issuing in California on January 1, 2018.
We are calling out Harris Bricken for having areally SHITTYblog policy where the DOESN’T publishes third-party comments…as they seem to view their own marketing efforts and an absolute “not invented here” BUNKER MENTALITY as more important than the informed discussion of an issue which is of critical import to the cannabis industry.
Our thoughts on critical areas of improvement and top pain points are summarized below. They were originally published in Cannabis – Gumballs Bad Combination. We believe that they represent an absolute priority of many of the items listed in Ms. Bricken’s article.
The creation and development of regulated, legal markets that are perceived as fair, having a reasonable cost without the complexity that so onerous that compliance is impossible [Our view is that California is well on its way to achieving that goal, though there are some significant corrections, notably with respect to compassionate medical use, compliance, and lab testing, and banking to be addressed.]
The development of a significant pool of licensed professionals, particularly attorneys, certified public accountants, enrolled agents [yep, that group that I poke at all the time is critical here assuming that they have the requisite thirty hours or accounting], and scientists [my term for the chemists, healthcare, and others with graduate-level degrees and professional licenses that are critical to demonstrating the integrity of the industry to the regulators.
Competent Skilled Workforce
The workforce that performs substantially all of the labor and services [distinct from Licensed Professionals] that provides skilled, semi-skilled and manual labor for the cannabis industry [akin the enlisted ranks in the military] are critical.
Industry Self-Governance, Guidelines, and Process
Our “PAIN POINTS”
“Pay to Play“ – Financial costs, beyond association membership for platform speaking slots at trade shows and conferences.
“Toxic Spew“– The willingness by the website owners, community and forum managers overlook criminality, incompetence, and the ramblings of soothsayers and “tossers” [collectively “Toxic Spew“] merely because they provide financial recompense. If posted content falls within that definition, it is rubbish and should NOT be published for sake of filling space.
“Whistleblowers“ and anyone else with the requisite expertise that identifies Toxic Spew must be protected, acknowledged and valued by the owners, sponsors, and managers for their role in bringing integrity to the industry. The banning, muzzling, shunning and castigation needs to end immediately, and any one individual or entity that engages in such practices scorned, sanctioned, subject to penalties that include reporting to regulatory authorities and law enforcement.
Respect, Dignity and Safe Environment – Everyone is entitled to expect that their interactions with colleagues, agents, suppliers, and clients will be non-threatening and respectful [that doesn’t preclude spirited disagreement or even argument] on a reciprocal basis. A safe, healthy, and productive work environment is a right, and in many jurisdictions, the law. Everyone needs to commit to eliminating any actions or circumstances that undermine such an environment. Unlawful discrimination, verbal or physical harassment or abuse, or offensive behavior (whether or not sexually related) is unacceptable and requires immediate, clear and consistent consequences.
We ENCOURAGE your comments and the healthy debate which should follow.
California Extends Privacy Rules – Adult Use – The Medicinal and Adult-Use Cannabis Regulation and Safety Act, among other things, provides for the licensure and regulation of commercial cannabis activity, including cultivation, manufacturing, distribution, and retail sale. Existing law requires licensees to maintain specified records of commercial cannabis transactions.
Existing law, the California Uniform Controlled Substances Act, makes various acts involving marijuana a crime except as authorized by law. Existing law, the Medical Marijuana Program (MMP),
requires counties to administer an identification card program for qualified patients and provides immunity from arrest to qualified patients with a valid identification card or designated primary caregivers, within prescribed limits.
Existing law requires information identifying the names of patients, their medical conditions, or the names of their primary caregivers received and contained in records kept by the Bureau of Cannabis Control for the purposes of administering the act to be maintained in accordance with state law relating to patient access to his or her health records, the Confidentiality of Medical Information Act, and other state and federal laws relating to confidential patient information, and provides that this information is confidential and exempt from disclosure under the California Public Records Act, except as specified.
The existing law deems information contained in a physician’s recommendation to use cannabis for medical purposes to be “medical information” within the meaning of the Confidentiality of Medical Information Act, and prohibits a licensee from disclosing this information, except as specified.
California Extends Privacy Rules – Adult Use
Existing law, the Confidentiality of Medical Information Act, prohibits providers of health care, health care service plans, contractors, employers, and 3rd-party administrators, among others, from disclosing medical information, as defined, without the patient’s written authorization, subject to certain exceptions, as specified. A violation of the act resulting in economic loss or personal injury to a patient is a misdemeanor and subjects the violating party to liability for specified damages and administrative fines and penalties.
This bill would prohibit a licensee from disclosing a consumer’s personal information, as defined, to a 3rd party, as specified, except to the extent necessary to allow responsibility for payment to be determined and payment to be made or if the consumer has consented to the licensee’s disclosure of the personal information. The bill would prohibit a licensee from discriminating against a consumer or denying a consumer a product or service because he or she has not provided consent to authorize the licensee to disclose the consumer’s nonpublic personal information to a 3rd party not directly related to the transaction.
This bill would deem a business licensed under the Medicinal and Adult-Use Cannabis Regulation and Safety Act that is authorized to receive or receives identification cards issued pursuant to the MMP or information contained in a physician’s recommendation to be a provider of healthcare subject to the requirements of the Confidentiality of Medical Information Act.
The bill would provide exceptions to the prohibitions on disclosure of a consumer’s personal information, identification cards, and information contained in a physician’s recommendation for a contractor providing software services to a licensee, as specified. By expanding the scope of a crime, the bill would impose a state-mandated local program.
METRC Frequently Asked Questions – are exactly what their name implies…a compilation of frequently asked questions about METRC
What is the California Cannabis Track-and-Trace system?
The California Cannabis Track-and-Trace (CCTT) system is the program used statewide to record the inventory and movement of cannabis and cannabis products through the commercial cannabis supply chain—from cultivation to sale.
What software is being used for this system?
And who is the service provider?
The state’s contracted service provider for the CCTT system is the technology company Franwell, Inc., and they are using the Metrc software program—the same program now used in many other states for their medicinal and adult-use cannabis programs.
Do I have to use CCTT-Metrc?
Yes. All state-issued annual licensees are required to use the CCTT-Metrc system to record, track, and maintain information about their cannabis and cannabis product inventories and activities. Please note that temporary licensees are not required to use the system, nor will they be provided access to it. Instead, the state’s emergency regulations require temporary licensees to document all sales and transfers of cannabis and cannabis products between temporary licensees—or between temporary licensees and annual licensees— by manually using paper sales invoices or shipping manifests. A sample sales invoice/shipping manifest (in a printable fill-in PDF) is available on the California Cannabis Portal’s California Track-and-Trace System web page, under Sales Invoice/Shipping Manifest Sample: cannabis.ca.gov/track-and-trace-system.
Note: All annual licensees must use the CCTT-Metrc system to manage inventory related to transfers to and from temporary licensees and to print an “external” manifest that serves as, or supplements, the paper manifest.
What is a Unique Identifier (UID)?
A unique identifier (UID) is an alphanumeric code or designation used to uniquely identify a specific plant, cannabis, and/or cannabis product on licensed premises. UIDs are specifically provisioned as the plant or package tags and are ordered by and assigned to the annual licensee within the CCTT-Metrc system. The annual licensee is responsible for assigning a CCTT-Metrc nonrepeating, a globally unique identifier to each immature lot, flowering plant, and distinct cannabis product. This assignment is accomplished via the issuance of encrypted radio-frequency identification (RFID) tags to annual licensees. The assigned UIDs then track the cannabis and cannabis products when they are transferred from one licensee to another.
METRC Frequently Asked Questions
How will I get my UIDs? And do I have to pay for them?
Once annual cannabis licensees or the designated Account Managers have been trained and provided access to the CCTT-Metrc system, they may order their UIDs through the system. The cost of UIDs, along with all other costs needed for administering California’s state cannabis programs (the California Department of Food and Agriculture’s CalCannabis Cultivation Licensing Division, California Department of Consumer Affairs’s Bureau of Cannabis Control, and the California Department of Public Health’s Manufactured Cannabis Safety Branch), their respective licensing systems, and the CCTT-Metrc system have been factored into the fees for the state’s cannabis licenses. There is no additional cost for the UIDs.
Do I have to complete the state-provided training before I can use the CCTT-Metrc system?
Yes. Upon submission of an annual-license application, the applicable licensing authority—the California Department of Food and Agriculture, the Bureau of Cannabis Control, or the California Department of Public Health—will send system-training registration information to the applicant. Annual licensees will not be allowed to access the CCTT-Metrc system until the required CCTT-Metrc Account Manager New Business System Training has been completed by license holders or their designated Account Manager. Applicants are strongly encouraged to complete the required user training while their annual license application is being reviewed. Once an annual license is approved and the license holder or designated Account Manager has completed the required CCTT-Metrc Account Manager New Business System Training, he or she will be able to access the CCTT-Metrc system.
When and how will CCTT-Metrc system training be provided?
Franwell provides the required CCTT-Metrc Account Manager New Business System Training sessions for licensees who have submitted an annual license application to one or more of the licensing authorities. These training sessions are provided via live, interactive webinars and pre-recorded webinars. The registration process for training is provided by the applicable licensing authority upon receipt of a complete annual license application.
As more annual licensees are credentialed into the CCTT-Metrc system, Franwell will offer more frequent Account Manager New Business System Training webinar sessions and additional “advanced topics” training opportunities.
Are there any restrictions on the number of designated CCTT-Metrc system users for each licensed individual or entity?
No. However, each licensee is required to designate an owner or another party in the licensed organization who can legally represent the licensed entity and act as the licensee’s CCTT-Metrc Account Manager. The licensee’s designated Account Manager will be required to complete the CCTT-Metrc Account Manager New Business System Training and subsequently train each licensee-designated system user in the proper and lawful use of the CCTT-Metrc system.
Note: Licensees will be responsible for all data entered into the CCTT-Metrc system by their employees or contractors.
METRC Frequently Asked Questions
Who will have access to my CCTT-Metrc information?
Pursuant to Section 26067(b) of California’s Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), information received and contained in the CCTT-Metrc system is confidential and may only be viewed by the licensee and authorized employees of the state of California, or any city, county, or city and county to perform official duties pursuant to MAUCRSA or a local ordinance.
Also, upon the request of a state or local law enforcement agency, licensing authorities will provide access to, or provide information contained in, the CCTT-Metrc system database to assist law enforcement in its duties and responsibilities pursuant to MAUCRSA.
Does the CCTT-Metrc system have an interface, or file upload process, that allows connection to third-party systems?
Yes. The CCTT-Metrc system offers access to third-party business applications via a standard Application Programming Interface (API) or file upload.
For more information, please see the “Integration and API” section of the Metrc California web page at: metrc.com/california. A list of third-party vendors who have completed the required steps and have been validated to use the API to interface with the CCTT-Metrc system also is accessible from the Metrc California web page.
Do I need to purchase additional hardware to use the CCTT system?
No. CCTT-Metrc is a completely web-hosted system, which means all access to the CCTT-Metrc system is via the Internet. Only an Internet connection (via an Internet service provider) and a web browser (such as Google Chrome, Internet Explorer, or Mozilla Firefox) is required. Access to a web browser and the Internet usually is achieved easily by using a computer, tablet, or smartphone. In addition, there is no software to download, install, or maintain.
How does using the CCTT-Metrc system allow the state of California to prevent inversion and diversion of cannabis or cannabis products?
The CCTT-Metrc system and plant- and package-tagging requirements alone are not expected to eliminate illegal inversion or diversion of cannabis throughout the commercial cannabis supply chain, but they are valuable auditing tools for assisting state and local compliance and enforcement staff. A multifaceted approach of regular monitoring—including reviews of licensee-reported data and onsite inspections—and referrals to law enforcement are expected to limit illegal movement significantly. The CCTT-Metrc system also will be used to identify anomalies indicative of potentially fraudulent activity. The state’s licensing authorities, sister state agencies, and local agencies will work collaboratively to develop analytical tools and inspection protocols to identify and investigate potentially fraudulent activity during all phases of the commercial distribution-chain activities, and they will take appropriate action as needed.
How can I find out more about the CCTT-Metrc system?
Additional information regarding the CCTT-Metrc system will be published on the following websites as it becomes available: California Cannabis Portal cannabis.ca.gov California Department of Food and Agriculture CalCannabis Cultivation Licensing Division calcannabis.cdfa.ca.gov California Department of Consumer Affairs Bureau of Cannabis Control bcc.ca.gov California Department of Public Health Manufactured Cannabis Safety Branch cdph.ca.gov/mcsb
Cannabis Business Accounting Guidelines- Requirements for Books of Account, Transaction Recording, Method of Accounting and Record Retention for Federal Income Tax and California Cannabis Regulatory Requirements
Cannabis dispensaries are cash businesses. [You can read more about accounting for entities that do business in cash here.] Most lack adequate internal accounting controls over cash. The books and records which are the financial record-keeping systems for the businesses have been historically weak. Those cannabis dispensaries with systems of internal accounting controls and financial record-keeping systems typically have lapses in the enforcement and maintenance of those systems. The IRS provides taxpayers with detailed suggestions for the types of records.
The setup and maintenance of proper accounting records, a system of internal accounting controls and the hiring, training and retention of competent accounting staff is perhaps the single most difficult task for cannabis businesses that are seeking to “go legal”. Our view is that the identification and retention of a competent firm of certified public accountants [“CPAs”] with cannabis industry experience is probably the single most important decision that new cannabis business needs to make. Once the CPA is retained, they will usually be able to assist the business owners in identifying, prioritizing and securing and solving every other service and compliance issue that they have.
The IRS provides guidance with respect to which records a business is required to keep. The IRS further describes how records should be maintained and how long the records must be retained This may well change in the near future as there are a couple of United States Tax Court cases pending decision that is likely to provide significant guidance on the application of IRC Sec.280E to cannabis dispensaries.
Finally, the agencies within the State of California with primary responsibility for oversight of the cannabis industry for regulatory compliance, which are the Bureau of Cannabis Control [“BCC”] for Retail [Dispensaries, Offsite Event and Distribution licensees, the California Department of Food and Agriculture’s [“CDFA”] CalCannabis Unit for Cultivation licensees, the California Department of Public Health’s [“CDPH”] Manufactured Cannabis Safety Bureau [“MCSB”] for Manufacturing, Extraction and Testing Laboratories and the California Department of Tax and Fee Administration [“CDTFA”], have issued a significant number of administrative pronouncements, regulations and Special Notices that expand upon the IRS’s requirements for financial records, recordkeeping, document formats, retention requirements and audit guidelines. The creation of a seed to sale “Track and Trace system, known as METRC is particularly onerous and detailed.
The application of Sec.280E to dispensaries is, however, the tip of the iceberg. IRC Sec.280E applies to “any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances…”. The unequivocal language of IRC Sec.280E, however, is equally applicable to cultivators, processors, manufacturers, distributors and cannabis delivery-services.
There may be some limits to the application of IRC Sec.280E to the cannabis industry. It appears unlikely the IRS will stretch IRC Sec.280E to apply its disallowance to a service business, such as marketing or representation businesses, or professional services such as attorneys, certified public accountants, that does not actually “touch the cannabis”. The use of the word “trafficking” suggests that IRC Sec.280E is solely applicable to in-line businesses that are directly involved in the series of activities that move an agricultural material from cultivation to the sale of the material to a consumer.
 The IRS provides guidance about the purposes of records, uses of records, and outlines their expectations about the types of records that they expect taxpayers to maintain. We have provided an overview:
Monitor the progress of your business. – You need good records to monitor the progress of your business. Records can show whether your business is improving, which items are selling, or what changes you need to make. Good records can increase the likelihood of business success.
Prepare your financial statements. You need good records to prepare accurate financial statements. These include income (profit and loss) statements and balance sheets. These statements can help you in dealing with your bank or creditors and help you manage your business. An income statement shows the income and expenses of the business for a given period of time. A balance sheet shows the assets, liabilities, and your equity in the business on a given date. Identify the source of receipts. You will receive money or property from many sources. Your records can identify the source of your receipts. You need this information to separate business from nonbusiness receipts and taxable from nontaxable income.
Keep track of deductible expenses. You may forget expenses when you prepare your tax return unless you record them when they occur.
Prepare your tax returns. You need good records to prepare your tax returns. These records must support the income, expenses, and credits you report. These are the same records you use to monitor your business and prepare your financial statements.
Support items reported on tax returns. You must keep your business records available at all times for inspection by the IRS. If the IRS examines any of your tax returns, you may be asked to explain the items reported. A complete set of records will speed up the examination.
Electronic records. All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records. When you replace hard copy books and records, you must maintain the electronic storage systems for as long as they are material to the administration of tax law.
An electronic storage system is any system for preparing or keeping your records either by electronic imaging or by transfer to an electronic storage media. The electronic storage system must index, store, preserve, retrieve, and reproduce the electronically stored books and records in a legible format. All electronic storage systems must provide a complete and accurate record of your data that is accessible to the IRS.
Electronic storage systems are also subject to the same controls and retention guidelines as those imposed on your original hard copy books and records. The original hard copy books and records may be destroyed provided that the electronic storage system has been tested to establish that the hard copy books and records are being reproduced in compliance with IRS requirements for an electronic storage system and procedures are established to ensure continued compliance with all applicable rules and regulations. You still have the responsibility of retaining any other books and records that are required to be retained.
The IRS may test your electronic storage system, including the equipment used, indexing methodology, software and retrieval capabilities. This test is not considered an examination and the results must be shared with you. If your electronic storage system meets the requirements mentioned earlier, you will comply. If not, you may be subject to penalties for non-compliance, unless you continue to maintain your original hard copy books and records in a manner that allows you and the IRS to determine your correct tax. For details on electronic storage system requirements, See Revenue Procedure 97-22.
Specific Records to Keep – Purchases, sales, payroll, and other transactions you have in your business generate supporting documents. Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. These documents contain information you need to record in your books. It is important to keep these documents because they support the entries in your books and on your tax return. Keep them in an orderly fashion and in a safe place.
Gross Receipts. Gross receipts are the income you receive from your business. You should keep supporting documents that show the amounts and sources of your gross receipts. Documents that show gross receipts include the following. Cash register tapes. Bank deposit slips. Receipt books. Invoices. Credit card charge slips. Forms 1099-MISC.
Inventory is any item you buy and resell to customers. If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. Your supporting documents should show the amount paid and that the amount was for inventory. Documents reporting the cost of inventory include the following. Canceled checks. Cash register tape receipts. Credit card sales slip. Invoices. These records will help you determine the value of your inventory at the end of the year.
Expenses are the costs you incur (other than the cost of inventory) to carry on your business. Your supporting documents should show the amount paid and that the amount was for a business expense. Documents for expenses include the following. Canceled checks. Cash register tapes. Account statements. Credit card sales slip. Invoices. Petty cash slips for small cash payments.
Recording Business Transactions, A good recordkeeping system includes a summary of your business transactions. (Your business transactions are shown on the supporting documents just discussed.) Business transactions are ordinarily summarized in books called journals and ledgers. You can buy them at your local stationery or office supply store. A journal is a book where you record each business transaction shown on your supporting documents. You may have to keep separate journals for transactions that occur frequently. A ledger is a book that contains the totals from all of your journals. It is organized into different accounts.
Whether you keep journals and ledgers and how you keep them depends on the type of business you are in. For example, a recordkeeping system for a small business might include the following items. Business checkbook. Daily summary of cash receipts. Monthly summary of cash receipts. Check disbursements journal. Depreciation worksheet. Employee compensation record.
 You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. This means you must keep records that support an item of income or deduction on a return until the period of limitations for that return runs out. The period of limitations is the period of time in which you can amend your return to claim a credit or refund, or the IRS can assess additional tax.
The following table provides a basic summary of record retention requirements:
THEN THE RETENTION PERIOD IS
1. Owe additional tax and situations (2), (3), and (4), below, do not apply
2. Do not report income that you should report, and it is more than 25% of the gross income shown on the return
3. File a fraudulent return
4. Do not file a return
5. File a claim for credit or refund after you filed your return
Later of: 3 years or 2 years after tax was paid
6. File a claim for a loss from worthless securities or a bad debt deduction
The length of time you should keep a document depends on the action, expense, or event which the document records. Generally, you must keep your records that support an item of income, deduction or credit shown on your tax return until the period of limitations for that tax return runs out. For most taxpayers, the general recommendation is to retain copies of tax returns and supporting documents at least three years. Some documents should be kept up to seven years in case a taxpayer needs to file an amended return or if questions arise. Taxpayers should retain records relating to real estate for at least seven years after disposing of the property.
Health care information statements should be kept with other tax records. Taxpayers do not need to send these forms to IRS as proof of health coverage. The records taxpayers should keep include records of any employer-provided coverage, premiums paid, advance payments of the premium tax credit received and type of coverage. Taxpayers should keep these — as they do other tax records — generally for three years after they file their tax returns.
Whether stored on paper or kept electronically, taxpayers are urged to keep tax records safe and secure, especially any documents bearing Social Security numbers. Consider scanning paper tax and financial records into a format that can be encrypted and stored securely on a flash drive, CD or DVD with photos or videos of valuables.
Now is a good time to set up a system to keep tax records safe and easy to find when filing next year, applying for a home loan or financial aid. Tax records must support the income, deductions and credits claimed on returns. Taxpayers need to keep these records if the IRS asks questions about a tax return or to file an amended return.
Keep tax, financial and health records safe and secure whether stored on paper or kept electronically. When records are no longer needed for tax purposes, ensure the data is properly destroyed to prevent the information from being used by identity thieves.
The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund, or the IRS can assess additional tax. Unless otherwise stated, the years refer to the period after the income tax return was filed. Returns filed before the due date are treated as filed on the due date. Filed tax returns can be helpful in preparing future tax returns and making computations if you file an amended return.
Period of Limitations that generally apply to income tax returns:
Keep records for 3 years, if situations (4) and (5) below do not apply to you.
Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later if you file a claim for credit or refund after you file your return.
Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.
Keep records of gross income for 6 years, which is the statute of limitations for assessment where a return omits more than 25% of gross income or 25% of gross receipts of a trade or business. Examples, where this can occur, is a reclassification of a related-party loan as income, constructive dividends, failure to report alimony, failure to report a discharge of debt income, and failure to report income from a pass-through entity.
Keep records indefinitely if have not filed a return.
Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.
The following questions should be applied to each record as you decide whether to keep a document or throw it away.
Are the records connected to property? Generally, keep records relating to property until the period of limitations expires for the year in which you dispose of the property. You must keep these records to figure any depreciation, amortization, or depletion deduction and to figure the gain or loss when you sell or otherwise dispose of the property.
If you received property in a nontaxable exchange, your basis in that property is the same as the basis of the property you gave up, increased by any money you paid. You must keep the records on the old property, as well as on the new property until the period of limitations expires for the year in which you dispose of the new property.
What should I do with my records for nontax purposes? When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. For example, your insurance company or creditors may require you to keep them longer than the IRS does.
Sec. 8400. Record Retention. – For the purposes of this chapter, the term record includes all records, applications, reports or other supporting documents required by the department.
(a) Each licensee shall keep and maintain the records listed in subsection (d) for at least seven (7) years from the date the document was created.
(b) Records shall be kept in a manner that allows the records to be provided at the licensed premises or delivered to the department, upon request.
(c) All records are subject to review by the department during standard business hours or at any other reasonable time as mutually agreed to by the department and the licensee. For the purposes of this section, standard business hours are deemed to be 8:00 am – 5:00 pm (Pacific Standard Time). Prior notice by the department to review records is not required.
(d) Each licensee shall maintain all of the following records on the licensed premises, including but not limited to:
Department issued cultivation license(s);
All records evidencing compliance with the environmental protection measures pursuant to sections 8304, 8305, 8306 and 8307 of this chapter;
All supporting documentation for data or information input into the track-and-trace system;
All UIDs assigned to a product in inventory and all unassigned UIDs. UIDs associated with a product that has been retired from the track-and-trace system must be retained for six (6) months after the date the tags were retired;
Financial records related to the licensed commercial cannabis activity, including but not limited to, bank statements, tax records, sales invoices, and sales receipts;
Personnel records, including each employee’s full name, social security, or individual taxpayer identification number, date of beginning employment, and date of termination of employment if applicable
Records related to employee training for the track-and-track system or other requirements of this chapter. Records shall include, but are not limited to, the date(s) training occurred, description of the training provided, and the names of the employees that received the training;
Contracts with other state-licensed cannabis businesses;
Permits, licenses, and other local authorizations to conduct the licensee’s commercial cannabis activity;
Records associated with composting or disposal of cannabis waste.
Documentation associated with loss of access to the track-and-trace system prepared pursuant to section 8402(d) of this chapter.
(e) All required records shall be prepared and retained in accordance with the following conditions:
(1) Records shall be legible; and
(2) Records shall be stored in a secured area where the records are protected from debris, moisture, contamination, hazardous waste, fire and theft.
Sec. 8401. Sales Invoice or Receipt Requirements. The licensee shall prepare a sales invoice or receipt for every sale, transport, or transfer of cannabis or nonmanufactured cannabis product to another licensee. Sales invoices and receipts may be retained electronically but must be readily accessible for examination by the department, other state licensing authorities, any state or local law enforcement authority, and the California Department of Tax and Fee Administration. Each sales invoice or receipt shall include all the following:
Name, business address, and department issued license number of the seller;
(b) Name, business address, and department issued license number of the purchaser;
(c) Date of sale or transfer (month, day and year). The date of any sale or transfer of cannabis and nonmanufactured cannabis products shall be the date of transfer to the licensee receiving it;
(d) Invoice or receipt number;
(e) Weight or quantity of cannabis and nonmanufactured cannabis products sold;
For the purposes of this section, a licensee must use wet weight or net weight. Wet weight and net weight shall be measured, recorded and reported in U.S. customary units (e.g., ounce or pound); or International System of Units (e.g., kilograms, grams, or milligrams).
Weighing Devices. A licensee shall follow weighing device requirements pursuant to section 8213 of this chapter.
(3) Count. For the purposes of this section, “count” means the numerical count of the individual plants or units.
(f) The cost to the purchaser, including any discount applied to the total price, shall be recorded on the invoice.
(g) Description for each item including strain or cultivar, and all of the applicable information below:
(h) Signature of the seller, or designated representative of the seller, acknowledging the accuracy of the cannabis and nonmanufactured cannabis products being shipped.
(i) Signature of the purchaser, or designated representative of the purchaser, acknowledging receipt or rejection of the cannabis or nonmanufactured cannabis products.
Sec. 8408. Inventory Audits. The department may perform an audit of the physical inventory and inventory as reported in the track-and-trace system of any licensee at the department’s discretion. Audits of the licensee shall be conducted during standard business hours or at other reasonable times as mutually agreed to by the department and the licensee. For the purposes of this section standard business hours are 8:00 am – 5:00 pm (Pacific Standard Time). Prior notice of audit is not required.
Sec. 8501. Inspections, Investigations and Audits. The department shall conduct inspections, investigations and audits of licensees including, but not limited to, a review of any books, records, accounts, inventory, or onsite operations specific to the license.
(a) The department may conduct an inspection, investigation or audit for any of the following purposes:
To determine the accuracy and completeness of the application prior to issuing a license;
To determine compliance with license requirements including, but not limited to, the cultivation plan;
To audit or inspect any records outlined in section 8400 of this chapter;
To respond to a complaint(s) received by the department regarding the licensee;
To inspect incoming or outgoing shipments of cannabis and nonmanufactured cannabis products; and
(6) As deemed necessary by the department.
(b) All inspections, investigations, and audits of the licensed premises shall be conducted during standard business hours or at other reasonable times as mutually agreed to by the department and the licensee. For the purposes of this section, standard business hours are 8:00 am – 5:00 pm (Pacific Standard Time). Prior notice of inspection, investigation or audit is not required.
(c) No applicant, licensee, its agent or employees shall interfere with, obstruct or impede the department’s inspection, investigation or audit
This includes, but is not limited to, the following actions:
Denying the department access to the licensed premises;
Providing false or misleading statements;
Providing false, falsified, fraudulent or misleading documents and records; and
(4) Failing to provide records, reports, and other supporting documents.
(d) Upon completion of an inspection, investigation or audit, the department shall notify the applicant or licensee of any violation(s) and/or action(s) the department is taking.
Coke With Your Cannabis? – CBD craze meets Coca-Cola. After an early morning report yesterday that Coca-Cola is in talks with Canadian cannabis company Aurora about CBD-based wellness beverages, the media went wild with headlines suggesting that the world’s largest beverage company was basically cannonballing into the cannabis industry.
Not so fast.
Cannabis Wire reached out to confirm the report about Aurora, and a Coca-Cola spokesperson declined to comment “on reports and speculation of talks with Aurora or others.”
While Coca-Cola did confirm interest in CBD in a statement published on their site later in the day, they presented it as totally unrelated to the plant … from which CBD is derived.
“We have no interest in marijuana or cannabis. Along with many others in the beverage industry, we are closely watching the growth of non-psychoactive CBD as an ingredient in functional wellness beverages around the world. The space is evolving quickly. No decisions have been made at this time.”
While, perhaps, they could be talking about CBD derived from hemp, CBD is still very much part of and one of the most abundant compounds contained in “marijuana or cannabis.”
Let’s be real. This is like saying you are eyeing the chicken nugget market, but have “no interest” in chicken.
it’s unlikely that a major company like Coca-Cola would offer a product infused with CBD in the United States until the federal law changes, said Kris Krane, president of 4Front, a firm that advises companies on the legalities of marijuana and an expert on cannabis law. He said he would expect that Coke would develop the product first for sale in Canada, readying it for the United States once it’s legal.
“I can’t imagine they’re doing it just for the 35 million people in Canada, they clearly have an eye on the US market,” said Krane.
Coke could be well positioned to capture market share should CBD and other marijuana products become legal, said Bonnie Herzog, an analyst with Wells Fargo. She said in a note to clients Monday that Coke is positioning itself for the long-term. She estimates that cannabis-infused drinks could become a $50 billion annual market in the United States — nearly half the size of the $117 billion markets for US beer sales.
Both Coke and rival Pepsico have been trying to expand their businesses beyond traditional soft drinks as people drink less soda because of health concerns. Just last week, Coke announced a deal to buy Costa Coffee for $5 billion.
Matthew Price, part owner and operator of Portland and Eugene medical marijuana dispensaries called Cannabliss, was sentenced Monday to seven months in prison, marking what a prosecutor called the country’s first federal sentencing of a legal marijuana business owner for tax crimes.
Price, 32, pleaded guilty to four counts of willfully failing to file income tax returns, a misdemeanor. He was ordered to pay $262,776 in restitution to the Internal Revenue Service for the tax loss. Copy of Cannabis Pricing – Dispensary
Price must turn himself in on Nov. 1.
The court must address a unique question in the case: Can Price continue working in his marijuana business until his surrender or after he completes his prison term? A hearing is set Friday to decide.
The matter arises because using or selling marijuana remains prohibited under federal law and is a standard prohibition during federal supervision.
Sell Cannabis – Fail Paying Taxes – Jail
As he was cheating on his taxes, Price was advising the Oregon Liquor Control Commission on appropriate rules for the state’s recreational marijuana businesses, said Assistant U.S. Attorney Seth Uram.
Oregon lawmakers approved a medical marijuana dispensary registry system in 2012, regulating an already-robust retail market for medical cannabis. Two years later, Oregon voters said yes to recreational marijuana, allowing anyone 21 and older to possess and grow marijuana and creating a taxed and regulated system for retail sales. Oregon issued its first licenses to recreational cannabis retailers in the fall of 2016.
With almost 1,000 new retail marijuana businesses in Oregon “ripe for tax cheating,” the prosecutor urged the judge to send Price to prison for a year and one day to foster tax compliance. A sentence of probation would encourage similar tax cheating in a lightly regulated industry, Uram argued.
“Cash-intensive businesses of all kinds are notoriously susceptible to tax cheating, and Oregon’s retail marijuana businesses are no different,” he wrote in a sentencing memo. “The court should not forego an opportunity to deter tax cheating by state-legal marijuana business owners who are going to wake up the day after Price’s sentencing hearing, read an article about his sentence, and decide what to do next April 15.”
Sell Cannabis – Fail Paying Taxes – Jail
Price failed to report nearly $1 million of income and disregarded advice from three different certified public accountants who for years warned him not to use his business money to pay personal expenses, the prosecutor said.
But Price did anyway, spending $67,000 in cash on a sports car, $15,000 in cash on a Rolex watch and other income on tropical vacations, expensive homes and season tickets to the Portland Trail Blazers, Uram said.
CA Legislature – Provisional Cannabis License Bill
CA Legislature – Provisional Cannabis License Bill – The California legislature is currently finalizing a bill (SB-1459) which would establish a provisional licensing regime for California cannabis businesses. The bill moved into “enrolled” status late last week, which means that SB-1459 has been approved by both houses of the state legislature and is being proofread to ensure all amendments were properly inserted. Once SB-1459 is “correctly engrossed”, only a signature from Governor Brown is needed for the bill to take immediate effect. In all, provisional licensing seems imminent.
These pending, provisional licenses would provide holders with a year-long, non-renewable, provisional license to operate after filing completed license applications. These provisional licenses would alleviate pressures on licensing agencies caused by the backlog of pending applications. Provisional licenses would also allow holders to continue operating, rather than potentially ceasing operations later this year.
Here is the current text of the statute [not signed by Gov. Brown yet]
CA Legislature – Provisional Cannabis License Bill
Section 26050.2 is added to the Business and Professions Code, to read:
(a) A licensing authority may, in its sole discretion, issue a provisional license to an applicant if the following conditions are met:
(1) The applicant holds or held a temporary license for the same premises and the same commercial cannabis activity for which the license may be issued pursuant to this section.
(2) The applicant has submitted a completed license application to the licensing authority, including evidence that compliance with the California Environmental Quality Act (Division 13 (commencing with Section 21000) of the Public Resources Code) is underway.
(b) A provisional license issued pursuant to this section shall be valid for 12 months from the date issued and shall not be renewed. Except as specified in this section, the provisions of this division shall apply to a provisional license in the same manner as to an annual license.
(c) Without limiting any other statutory exemption or categorical exemption, Division 13 (commencing with Section 21000) of the Public Resources Code does not apply to the issuance of a license pursuant to this section by the licensing authority.
(d) Refusal by the licensing authority to issue a license pursuant to this section or revocation or suspension by the licensing authority of a license issued pursuant to this section shall not entitle the applicant or licensee to a hearing or an appeal of the decision. Chapter 2 (commencing with Section 480) of Division 1.5 and Chapter 4 (commencing with Section 26040) of this division shall not apply to licenses issued pursuant to this section.
(e) This section shall remain in effect only until January 1, 2020, and as of that date is repealed.
No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.
The Legislature finds and declares that Section 1 of this act adding Section 26050.2 to the Business and Professions Code furthers the purposes and intent of the Control, Regulate and Tax Adult Use of Marijuana Act of 2016.
This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
The significant number of cultivation license applications pending with local authorities that do not have adequate resources to process these applications before the applicants’ temporary licenses expire on January 1, 2019, threatens to create a major disruption in the commercial cannabis marketplace.
Check Out Wake – Bake Daily Site – if you are anything like us, and spend your days busting your ass working on, and living with the California commercial cannabis industry at some point you start to take yourself way too seriously. That’s exactly how we feel about Mr. Sean Hocking, the publisher of wakeandbakedaily.com. Our sense is that this tidbit of wisdom from stonerjesus.net captures the consequences of doing that.
We will be adding their RSS Feed to our front page.
We welcome our regular contributor Jordan Zoot to Waked & Baked Daily. Jordan Lives In Oakland and has been involved in CA’s regulated cannabis market for many years. ” Yo Smoked Good Shit Literally – say hello to Escherichia coli [“E coli”]. Escherichia coli (E. coli) bacteria normally live in the intestines of healthy people and animals. Most varieties of E. coli are harmless or cause relatively brief diarrhea. But a few particularly nasty strains, such as E. coliO157:H7, can cause severe abdominal cramps, bloody diarrhea, and vomiting. AND IT MAY BE IN YOUR STASH.”