Can 471(c) help your tax situation?

So, what is IRC 471(c) and how can it help?

IRC 471(c) is a newer code section of the Internal Revenue Code (“IRC”). It pertains specifically to reclassifying payments made to vendors/supplies that affect the inventory of a company. It is not specifically a cannabis code section. Tax professionals began to look at it as an opportunity to apply it to cannabis after its introduction to the IRC in 2018.

The impact of 471(c) is felt more in the parts of the industry where cannabis goods are sold, such as distribution and retail. Without using 471(c) cost of goods sold (“COGS”) for distro and retail is limited to cost of products for resale and inbound freight. With the use of 471(c), other payments to vendors/supplies that are associated with inventory and inventory management can be included.

To discuss your specific situation, please contact us at Info@CannabisCPA.Tax.