Financial risk management doesn’t stop at theft or inventory loss. In cannabis, tax exposure may be the single greatest risk operators face. With federal law still treating cannabis as a controlled substance, the IRS has drawn a firm line: Section 280E applies. Yet, some businesses continue to ignore it altogether, gambling on enforcement delays. That’s a dangerous bet one that can result in crushing back taxes, penalties, and interest.
At Tuross Group, we view tax compliance as an essential part of financial risk management. Our team runs detailed 280E calculations for every client, then advises them to ringfence reserves so there are no surprises in the event of an IRS audit. The goal is simple: plan for the inevitable, protect cash flow, and keep licenses and reputations intact.
280E and 471: The Rules of the Game
280E: Disallows most deductions for cannabis businesses beyond Cost of Goods Sold. Ignoring it only compounds risk.
471(c): Offers limited accounting methods that can reduce exposure when applied carefully, but must be defensible and consistent. Together, these provisions define the financial reality for cannabis operators. Compliance isn’t optional, it’s survival.
Beyond Federal: State and Local Tax Risks
Federal exposure is only part of the picture. State and local taxes from excise to sales to cannabis-specific business taxes bring their own complexities and risks. Many operators underestimate how quickly these liabilities add up. Late or incorrect filings don’t just create financial strain; they damage credibility with regulators and investors.
At Tuross, we calculate these obligations on a weekly or monthly basis and encourage clients to ringfence the funds in real time. This discipline ensures operators aren’t blindsided at year-end and can focus on growth rather than scrambling to cover liabilities.
Tax Planning as Risk Management
Tax strategy in cannabis isn’t about creative loopholes; it’s about risk control. By respecting the framework of 280E and 471, planning for state and local liabilities, and reserving funds in advance, operators turn a major threat into a manageable, predictable expense.
The businesses that succeed aren’t the ones who roll the dice with the IRS — they’re the ones who plan, prepare, and protect themselves with sound financial systems.
The Tuross Difference
At Tuross Group, we integrate tax planning directly into financial operations. From daily accounting and payroll to advanced analytics and 280E/471 compliance, our 40+ person team builds a scalable, cost-efficient infrastructure that shields operators from avoidable risks. By combining rigorous accounting discipline with proactive tax strategy, we give cannabis businesses what they need most: clarity, credibility, and confidence.on
