Cannabusinesses experience audits regularly with substantial negative outcomes of a bad audit. There are a variety of substantiation tools you can use to assist in supporting your business in an audit, most being required by the state (on a state-by-state basis). Audits are more likely to occur for cannabusinesses, so it is important to have records/receipts, keep up-to-date state and federal codes, stay on top of deadlines, properly deduct business expenses, and appropriate verification tools.
- Receipts. Knowing what counts as a receipt is a small, yet important, aspect of your records. To qualify as a receipt for a transaction you need: (1) the amount, (2) the date, (3) the place, and (4) the nature of the expense. Receipts can be paper or digital as long as they are still legible.
- Cash. Protecting your business in an audit comes down to the everyday business interactions, but also about your policies. Your internal cash handling policies and records should be well-documented.
- Form 8300. In addition to cash records discussed briefly above, when cash transactions meet or exceed $10,000, a specific form needs to be completed to keep your business in compliance. Form 8300 should be completed every time you go over this limit.
- Documenting your 280E compliance. 280E compliance is important; however, it means nothing if it is not properly documented. To know more about being compliant with these federal regulations, check out our entire dedicated page on 280E compliance.
