By John Ostapowicz / The Jambar
The Williamson College of Business Administration hosted an hour-long seminar Oct. 23 to inform students about the increasing opportunities in the cannabis industry.
Kurt Seifert and Gabrielle Herdman, members of Hill, Barth & King LLC’s Cannabis Industry Solutions department, held the seminar in coordination with Beta Alpha Psi and the Institute of Management Accountants.
The seminar informed Youngstown State University students of the financial restrictions, nonuniform state regulations and cash management limitations imposed on the cannabis industry by the IRS and other federal offices.
HBK was founded in Youngstown in 1949, and recently, the firm has created Cannabis Solutions. Its main focus is to help cannabis companies navigate several accounting and financing tasks such as banking, licensing and raising capital.
Christopher Marrie, the national director of Cannabis Solutions and a YSU alumnus, said the department offers traditional accounting services for cannabis companies from audit work to tax consultations.
“We’ve tried to build a practice that addresses any issues a client has. Even if it’s something we can’t directly do, we build a lot of relationships and we can help them with these challenges,” Marrie said. “It’s a cutting-edge industry and there’s a lot of issues, obviously it’s still federally illegal.”
Regional director of Cannabis Solutions and a YSU alumnus, Eric Grischow, maintains Youngstown’s cannabis industries by providing contacts and knowledge of federally mandated laws on the cannabis industry. He said the only tax deduction marijuana-related businesses can receive is the direct cost of goods sold.
“[Cannabis companies] are not taxed as ordinary, necessary business expenses. Through various court cases over the last 40 years, they’ve been subject to being only able to deduct the cost of what is sold,” Grischow said.
Grischow also helps local cannabis startups apply for state licenses in Ohio.
The Ohio Department of Commerce grants licenses to four main areas of the cannabis industry — cultivators, processors, dispensaries and testing laboratories. Businesses within those four fields receive a limited number of available licenses.
“We’ve helped — specifically in Ohio — not only being tax compliant, but we’ve also assisted with assurance work and consulting on inventory costing,” Grischow said. “We’ve been a resource for our clients in Ohio to introduce contacts to expanded operations.”
Green Leaf Therapy, a dispensary in Struthers, was approved by Ohio’s Division of Cannabis Control for a dual-use provisional license for both medical and adult use, which began Aug. 6.
In Ohio, the state applies a 10% excise tax and a 5.75% state sales tax on adult-use cannabis sales.
Grischow said 36% of the yield from the 10% tax will go towards Struthers. The money generated from the tax is deposited into the adult-use tax fund, which is distributed in four ways:
— 36% to the Cannabis Social Equity and Jobs Fund to help those affected by marijuana prohibition.
— 36% to municipalities with dispensaries.
— 25% to the Substance Abuse and Addiction Funds.
— 3% to offset administrative costs for the DCC.
“Struthers itself, specifically, would essentially get 36% of that 10% that is levied on. They’re proportionally getting more than a standard sales tax, which would be held at the county,” Grischow said.
Cannabis Solutions also helps cannabis companies by assisting in depositing money for funding and employee payroll.
Although marijuana is considered legal in Ohio, federally licensed banks are unable to conduct business with cannabis companies.
Another part of working in the cannabis industry is learning to navigate Internal Revenue Code Section 280E. According to the IRS, cannabis companies are not entitled to tax refunds related to Code Section 280E.
The 77 words listed in Section 280E are used as the precedent in numerous and ongoing court cases regarding cannabis companies seeking financial tax credits.
Section 280E prohibits deductions to businesses that traffic Schedule I or Schedule II controlled substances, which are still considered federally illegal. With marijuana still listed as a Schedule I drug by the Drug Enforcement Agency under the Controlled Substances Act of 1970, cannabis companies are unable to regain financial losses.
According to the United States Department of Justice, President Joe Biden asked the Office of the Attorney General and the secretary of the Department of Health and Human Services on Oct. 6, 2022, to restructure the classification of cannabis.
For several cannabis-related businesses and Cannabis Solutions, the potential reclassification of marijuana to Schedule III would help to alleviate financial hurdles imposed by Section 280E.
Schedule III drugs are considered to have medicinal properties that qualify to help treat specific conditions. Current Schedule III drugs include testosterone, ketamine and Tylenol with codeine, which are legal to prescribe as controlled substances.
For more information on HBK and Cannabis Solutions, visit hbkcpa.com.
