ERC for Cannabis Companies
Amid record inflation and fears of a recession, the already cash-strapped cannabis industry is experiencing mass layoffs and financial woes as they adjust after multiple years of “essential” status during COVID-19.
Despite the increasingly challenging economic environment, the least suspected entity may offer relief for many ailing cannabis businesses. This entity? The IRS. The program? The Employee Retention Credit.
Do cannabis companies qualify for ERC?
The short answer: yes. ERC, or the Employee Retention Credit is applicable to all businesses that operated in 2020 and 2021 during the height of COVID-19 restrictions.
The ERC was rolled out in March of 2020 as part of the CARES Act, allocating nearly $80 billion in tax credits for businesses impacted by COVID-19. The program was initially established to help businesses who retained employees through the unprecedented developments of 2020 and 2021, but any business that was financially impacted by COVID-19 restrictions may qualify for a tax credit of $5,000 to $26,000 per W2 employee.
Even if a business was profitable in 2020 and 2021, they may still qualify for ERC. For the struggling plant-touching business owner with several employees, the tax credit can add up to a significant sum that can certainly help during the recent tough times.
It’s important to note that ERC differs from other programs that were launched to provide pandemic relief, such as PPP, the Paycheck Protection Program and Loan Forgiveness. Lots of plant-touching cannabis businesses found that they were not eligible for PPP, but due to the 2018 Farm Bill, hemp companies and ancillary businesses were able to apply for and receive PPP loans. Even if a business received PPP, they are still eligible to apply for the ERC.
During a time when many operators, retailers, manufacturers, and ancillary businesses are struggling to keep the lights on, the ERC can provide much needed cash, which is exactly what it was intended to do.
How exactly does ERC work?
Businesses must submit an application for the ERC to the IRS which details how they were impacted by COVID-19 restrictions. This doesn’t necessarily mean economic hardship, it could simply translate to having to adjust a business model to add on curbside pick-up, or struggling with supply chain issues at a processing center. During the application process, the business will also be informed of how much tax credit they qualify for. This sum ranges anywhere from $5,000-$26,000 per employee and is based on a variety of qualifying factors.
Even cannabis businesses that started after February of 2020 may qualify under specific ERC provisions, with the potential to receive up to $100,000 in refundable credits.
Businesses of all sizes are eligible for ERC. This includes SMEs, small and medium enterprises, tax-exempt businesses, as well as large corporations.
What about 280E?
Many cannabis operators believe that they do not qualify for ERC because of restrictions placed on them by 280E, a tax code prohibiting cannabis businesses from deducting ordinary business expenses from their gross income. However, because the ERC is a payroll tax credit resulting in a refund based on Form 941, 280E does not apply.
Why should cannabis companies choose CompleteRefunds.com?
Due to the contingent nature of ERC, without proper background on the processes that go into operating a cannabis business, operators may lose out on funds that would otherwise be available to them. Any mistake or oversight could mean a difference of hundreds of thousands of dollars.
To date, we’ve successfully filed over $30M in cannabis ERC tax credits alone. We’ve firmly positioned ourselves as a trusted cannabis industry partner and I’ve personally conducted countless meetings walking cannabis businesses through the ERC process. Below are some examples of successful filings, and it’s important to note that they were all previously advised that they did not qualify for ERC.
- Major Emerald Triangle cannabis brand received $2M+.
- Multi-store operator and distribution center received $1.7M.
- Small California delivery business received $800k.
With a significant amount of money on the line, it’s in any business owner’s best interest to investigate whether or not their business is eligible for ERC. Working with professionals means expediting an otherwise tedious application process and assuring that their business remains 100% compliant. At CompleteRefunds.com, we’ve put together a team of financial services experts and CPAs to conduct a thorough analysis of your business. We’re well-versed in the cannabis landscape and ready to answer any questions you might have about your business and ERC eligibility. Contact us today.
