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International Cannabis: Guidance for Companies Entering the U.S. Market, Part 2 – Taxation

In prior blog posts (see here and here), I described how we have been fielding regular inquiries regarding international cannabis, both from companies inside the U.S. looking internationally and from international companies looking to the U.S. market. This post deals with taxation issues for international companies seeking to enter the U.S. market. Tax Treaties. The […]

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international cannabis tax

In prior blog posts (see here and here), I described how we have been fielding regular inquiries regarding international cannabis, both from companies inside the U.S. looking internationally and from international companies looking to the U.S. market. This post deals with taxation issues for international companies seeking to enter the U.S. market.

Tax Treaties. The first level of taxation inquiry when looking to do business in the U.S. is to determine whether your home country is one of the 68 that has a bilateral tax treaty in place with the U.S. (see here for the IRS’ definitive list). The “tax” purpose of these tax treaties is to ensure taxable income is accounted for so that it can be taxed. The “treaty” part of the tax treaties refers to the agreement between the countries that their respective taxing authorities will apply certain reduced tax rates or entirely do away with other tax rates so as to avoid double taxation, fostering a more favorable business environment between the two countries.

IRC Section 280E. In the U.S. where cannabis as marijuana (> 0.3% THC content) continues to be illegal at the federal level, the IRS (Internal Revenue Service) keeps an eye on cannabis company taxation issues, particularly Section 208E of the Internal Revenue Code that deals with acceptable business deductions (cost of goods sold or COGS) for illegal enterprises (See 26 USC Section 280E. Expenditures in Connection with the Illegal Sale of Drugs). Section 280E is extremely important to cannabis (marijuana) companies, and their CPAs have the code section memorized.

Section 280E is less crucial for companies that are purely working with cannabis as hemp (< 0.3% THC). This is due to the 2018 Farm Bill that effectively legalized hemp by removing it from the definition of marijuana as a scheduled controlled substance. So companies that are purely dealing with hemp will find that their U.S. federal taxation issues are not significantly different from any other legal business industry in the U.S. That does not make U.S. taxation simple – only less complicated and more profitable due to the tax savings from being able to deduct normal business expenses.

State Tax Issues. For international cannabis companies looking to sell at retail in the U.S., whether through brick-and-mortar or through e-commerce sales, most of your (non-employee) U.S. tax concerns will center on U.S. state sales tax. Each state within the U.S. has its own sales tax rate, and each city and town generally has its own additional sales tax, so your U.S.-based accounting firm’s assistance will be crucial in ensuring you are withholding and paying the correct amount of sales tax for each transaction.

This helpful graphic and chart from the Tax Foundation will give you a good overview of US sales tax. Fortunately, U.S. sales tax is rarely as high as many international jurisdictions (for instance, 20% sales tax in Switzerland compared to 10-12% in some parts of Washington state).

You may owe business income tax in many U.S. states, depending on your level of activity in those states. Basically, wherever your customer is located, you will be responsible to collect and remit sales tax in those states.

Cannabis-Friendly CPA Firms. Lawyers are risk-adverse by nature. Accountants are the even more risk-averse cousins of lawyers. So you can imagine that finding a good CPA firm that understands international tax issues, federal tax issues (including IRC Section 280E), the difference between a marijuana business and a hemp business, state income tax, state sales tax, state and federal employment tax, etc., AND has a good head for business is as difficult as it is important. I know a few, but they are rare.

Are Lawyers More Important than CPAs? I love to ask my CPA friends this question. Obviously, the answer is yes if I am answering the question, but we are really two straps to the same pair of suspenders. When you as an international cannabis business owner are looking at the U.S. market, you need to find a good law firm and a good CPA firm, and you need your CPA firm involved at least as early as your lawyers. You need to do this so that both your lawyers and your CPAs can strategize with you regarding your business plan to take advantage of the optimal intersection of state cannabis laws, regulations, and enforcement regarding your cannabis activities, as well setting up operations in the states with a favorable business environment where corporate and franchise taxation are low or nonexistent.

In the next blog post in this series, I will address more U.S. legal considerations for international cannabis companies looking to capitalize on the U.S. market.

The post International Cannabis: Guidance for Companies Entering the U.S. Market, Part 2 – Taxation appeared first on Harris Bricken.

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Growing

How to Identify Pests in Your Cannabis Grow

Experienced and novice cannabis growers alike understand that pests can ruin a crop, no matter how well watered, fed, or tended. One of the keys to making sure that your plants grow into healthy, robust, and consumable cannabis is to keep a close eye o…

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Experienced and novice cannabis growers alike understand that pests can ruin a crop, no matter how well watered, fed, or tended. One of the keys to making sure that your plants grow into healthy, robust, and consumable cannabis is to keep a close eye on any pests that might infiltrate your grow, then take the appropriate steps to eradicate them without ruining your garden. Not only will it help keep the plants alive, thriving plants have more energy to produce trichomes and terpenes, making for better bud

Let’s take a look at some common pests found on cannabis plants, how to identify them, and lastly, get rid of them for good. With just a little maintenance and vigilance, your cannabis garden can be pest-free.

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Common Pests Found on Cannabis Plants

According to the Smithsonian Institution, there are likely more unclassified insects in the world than classified, and the running guess is somewhere between 2 million and 30 million. Thus, this is by no means a definitive list of bugs that feed on cannabis but should serve as a good starting point for most pest problems. 

Caterpillars

Before a caterpillar turns into a beautiful butterfly and flits away, it can be very hazardous to your cannabis plants. You know that book The Very Hungry Caterpillar? Turns out it’s a true story about how caterpillars eat everything in sight, including that tasty cannabis. Caterpillars can be very dangerous because they tend to go unnoticed, especially if they are a borer caterpillar, meaning they burrow into the plant and eat it from the inside out. But even caterpillars on the exterior will nosh away, potentially causing great damage to your plants. 

To figure out if caterpillars are ruining your plants, inspect the leaves weekly for holes from feeding, droppings on the leaves that look like tiny black specks, holes, and damage to the stems, and yellowing on upper leaves.

Natural enemies of caterpillars are wasps and praying mantises, and introducing those to the environment could make a difference. These options are typically easier for outdoor grows, but can also work indoors with some preparation. Other interventions include using a product like Bug Blaster spray or neem oil (which you can make at home).

Neem oil use has been controversial in some cannabis circles, as there is a belief among some that it may play a role in CHS (Cannabis Hyperemesis Syndrome), however, no definitive statements can be made without more research. The connection between neem oil and cannabis hyperemesis syndrome has yet to be fully explored or verified, but it’s still good to be aware and to be sure to closely follow usage directions.

Aphids

Even house plants have the occasional plague of aphids. Tiny and red, yellow, black, pale, green, or brown, these bugs can be easy to miss because they cling to the underside of leaves, reproduce quickly, and drain your plant of nutrients. Outdoor grows tend to fare a little better in the battle against aphids since natural predators are present, but indoor plants can be decimated quickly by these teensy pests. Not only do they siphon nutrients away from the plant, they leave a sweet substance called “honeydew” that attracts other insects and turns the leaves black and moldy

Aphids and their honeydew on a plant

The honeydew left behind from aphids leads to further damages to the plant by attracting even more pests. photo credit

Because that honeydew attracts other pests, if you begin to notice a lot of ants or ladybugs coming around your plants, it’s a pretty good sign that you’re well into an aphid problem. Aphids can be hard to shake, but wasps and ladybugs are natural predators. Nonetheless, you should visually inspect the underside of plant leaves at least once a week. If introducing predators doesn’t ameliorate the problem, there are a couple of natural solutions to get rid of cannabis pests to try, like garlic or tomato leaf water. 

Spider Mites

Spider mites are like the supervillains of cannabis pests: uber reproductive, zombie-like in their ability to come back from what you thought was death, capable of spinning webs while eating everything in sight then completely disappearing before turning up again – they’re nearly impossible to spot and even harder to eradicate. Spotting spider mites is difficult because they are minuscule, but doing a daily inspection of both sides of your plant leaves could help to prevent a massive infestation.

Signs of spider mites begins with speckles, then a browning or yellowing of leaves, and premature leaf death.

If any parts of your plant are covered in fine webbing, that’s a sure sign you’re in a bad spot. The best way to avoid mites is to stay vigilant with your leaf inspections. If you do notice signs of mites, try introducing a fan into the environment. Strong air currents make it difficult for mites to breed. Spider mites also prefer temperatures of 60-80 degrees, so experimenting with temperature might also slow an infestation down. Since mites are likely to come back, consider a spray like Azamax or Spinosad to get rid of them for good (again, be sure to follow use directions carefully).

Fungus Gnats

Fungus gnats are just as hungry as caterpillars, but their gourmet meal is from the stem and roots of your plants and not the leaves. Beginning at the topsoil level, both larvae and adults will munch their way down into the root system, badly impact plant drainage, and compromise the structural stability of your plants. However, they’re nearly impossible to spot because they are dark in color, as is soil.

Fungus Gnats

Although fungus gnats are small, the damage they leave behind is mighty. photo credit

Seeing swarms of gnats near the base of your plant is one sign you’ve got a fungus gnat problem. Other symptoms are stems that weaken and simply fall over, adult plants that start to droop, wilt, spot, or yellow, or plants that stop growing altogether. 

Fungus gnats love moist conditions, so keeping the top layer of soil dry is a smart preventative measure. Some other hacks to try include placing a cloth on top of the soil to prevent female gnats from laying eggs or laying a sticky pad near the plant’s base to stick larvae. You could also mix some peroxide and water and spray it around the area of gnat infestation. A common-sense tactic for an indoor grow is to put screens on the windows and the doors closed to keep gnats out. 

Why Pests and Bugs Are Attracted to Cannabis

Something to keep in mind about pests, in general, is that they love a monoculture or a space dedicated to growing only one crop. Researchers from the University of California Davis theorize that if an insect makes itself at home in that one crop, it has a large food supply, creating an all-you-can-eat kind of scenario for the pest, making it that much harder to eradicate. As you likely don’t want to introduce other plants into a cannabis garden (for a number of reasons), this issue will always exist to some degree when dealing with weed. 

This is why, as mentioned, another option is to introduce other beneficial insects. Not only do they prey on harmful pests, but they are also an excellent chemical-free pest control option. The bugs already want to be there, you’re just bringing them to the dinner table. 

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The Wrap Up

Identifying pests should be a regular ritual, just like watering and delivering nutrients to your plants. When you keep them pest-free, all that hard growing work will hopefully pay off in healthy and efficacious plants. Once you’ve harvested, you can move on to other fun challenges like doing a proper cure for your cannabis harvest, and how to store your cannabis stash


How do you deal with pests in your cannabis grow? Share your techniques in the comments!

Photo Credit: ilovegrowingmarijuana (license)

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Connecticut

Governor of Connecticut Pushes For Legalizing Adult-Use Cannabis In Budget Address

Connecticut’s Governor Ned Lamont proposed legalizing recreational cannabis in his budget address this week.

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Connecticut’s Governor Ned Lamont proposed legalizing recreational cannabis in his budget address this week.

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News

South Dakota Governor Delays Implementation of Medical Marijuana Initiative

It seems that Governor Kristi Noem isn’t quite done derailing voter-approved cannabis initiatives.

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It seems that Governor Kristi Noem isn’t quite done derailing voter-approved cannabis initiatives.

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