Bill: You once told me that persistence and resilience are themes for you. How have these themes carried over into your professional life, in the work that you do with your clients? 

Cesar: I’ve always believed that if you’re resilient and persistent, you achieve better fruits in the future. That applies directly to our professional role. Audit engagements, especially with public company clients, can be very difficult to get comfortable with from another perspective. But if we stay persistent, we can deliver results, meet deadlines, and get to the finish line. 

Bill: Let’s talk about how that relates to cannabis. When resilient companies in that space try to raise capital, what are some of the challenges you see? 

Cesar: Investors are cautious. When cannabis companies issue debt, investors often want more than just a high interest rate — they want warrants on top of that. But warrants come with complications. If holders have anti-dilution rights, then when the company raises more capital, those warrants can’t be diluted. That creates liabilities. We understand the derivative activity that results from these structures and how to address them from an accounting standpoint.  

Bill: Beyond financing, many cannabis companies are also growing quickly through acquisitions. They obviously have to be persistent, but what issues come up there?  

Cesar: Smaller operators often start with one or two dispensaries or a single greenhouse and then expand rapidly to 20 or more locations. That triggers business acquisitions. The question is…how do you account for those transactions? Do you observe inventory on day one? Some firms skip that, and it becomes a finding. We focus on doing things right every step of the way. 

Bill: You’ve also worked on some very complex biotech audits, including situations where larger firms struggled. Can you share one of those experiences? 

Cesar: Sure. We were referred to a situation with a larger biotech company that had been audited by a Big Four firm. The Big Four couldn’t trust management on certain foreign transactions. Every question went up to their national office, and it dragged on for weeks. Quarterly reviews stalled, the prior year audit wasn’t completed, and the current year audit was at risk. 

We came in and approached things differently. Instead of sending information up the chain, we sat down with management — CEO, CFO —and made phone calls in front of them, validated the information directly, and often resolved issues the same day. We pulled in legal, transactions, and accounting teams, connected the dots, and identified where the real issue was. 

Over three to four months, thousands of hours, we caught up on quarterly reviews, delivered the prior year audit, and positioned the company for the current year audit. We presented our findings to the audit committee, including material weaknesses and deficiencies, but we got to the finish line. And we did it without shying away from tough conversations. All while still keeping the audit on track. 

Bill: That’s exactly what stands out, Cesar. Whether it’s cannabis companies navigating capital raises and acquisitions, or biotech firms dealing with high-stakes audits, you and your team get results. 

In cannabis and biotech alike, persistence, technical depth, and a hands-on approach make the difference between stalled progress and a successful outcome. At MGO, we combine resilience with practical execution to help clients navigate complexity and move forward with confidence. Contact us to learn more.  

The post MGO Stories: From Cannabis Capital to Complex Biotech Audits appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Expanding through contract manufacturing opens opportunities for your cannabis or hemp brand — but also brings complex financial and regulatory challenges.

• Stay ahead of tax risks by aligning your operations with both federal and state compliance rules.

• Strengthen your contracts and tracking systems to keep royalty payments accurate and transparent.

—

Contract manufacturing arrangements can accelerate brand growth for cannabis and hemp companies, but they present complex tax, accounting, and compliance challenges. To protect financial integrity and valuation, companies must:

• Recognize and present revenue in a manner consistent with accounting standards and investor expectations. 

• Structure operations to preserve favorable tax status — especially for cannabis intellectual property (IP) entities avoiding Internal Revenue Code (IRC) §280E. 

• Monitor multi-jurisdictional tax nexus triggered by licensing activity. 

• Implement clear, enforceable, and regularly reconciled royalty calculation methods.

1. Revenue Recognition and Financial Presentation

Accounting Considerations

In contract manufacturing models, brand owners typically license IP to local manufacturers, who produce and distribute products under the brand name in exchange for royalty payments. Under U.S. generally accepted accounting principles (GAAP), this licensing arrangement should be accounted for as royalty income — distinct from product sales revenue recorded by manufacturers.

• Licensed operators: Recognize product sales with corresponding inventory and cost of goods sold (COGS).

• IP companies: Recognize only royalty income, without inventory or COGS.

For both cannabis and hemp operators, proper classification ensures financial statements reflect contractual entitlements — not hypothetical retail values — which can withstand both audit and investor due diligence.

Investor and Valuation Impact

Royalty-based models often report lower top-line revenue than direct sales, potentially influencing valuation multiples in capital raises. Your company can mitigate this perception by:

• Presenting retail market performance data as supplemental (non-GAAP) information.

• Demonstrating brand market share, pricing strength, and geographic expansion.

• Maintaining accounting integrity by ensuring GAAP statements reconcile with contractual royalty terms.

Sophisticated investors prioritize accuracy and contractual consistency over inflated revenue optics.

2. Tax Positioning and Regulatory Compliance

Cannabis: Preserving Non-280E Status

Cannabis IP holding companies that do not sell THC products directly and operate as an independent trade or business are generally not subject to IRC §280E and enjoy a significantly lower federal tax burden than state-licensed cannabis operators. However, maintaining this advantage depends on operational alignment between a company’s tax position and accounting presentation.

• Revenue must be recorded as royalty income, not product sales.

• General ledger (GL) accounts and financial statement categories must reflect licensing activity, not manufacturing operations.

Misalignment — such as recording product sales revenue while claiming 280E exemption — can trigger IRS scrutiny.

Hemp: Avoiding Misclassification

While hemp companies are generally outside §280E due to the 2018 Farm Bill, misclassification of revenue streams can still lead to incorrect tax filings, higher tax liabilities, or state compliance issues.

Proactive Compliance Measures

• Regular review of GL account descriptions and revenue categories.

• Documentation that ties reported revenue directly to licensing contracts.

• Periodic confirmation that financial presentation supports intended tax treatment.

For cannabis brands, this is critical to preserving 280E protection; for hemp, it safeguards proper business classification and tax outcomes.

3. State Tax Nexus and Multi-Jurisdictional Compliance

Income Tax Nexus

Licensing IP can create state income tax nexus without physical presence. States differ in sourcing rules — some focus on where products are consumed, others on where IP is exploited. Cannabis companies must navigate cannabis-specific rules layered over general sourcing provisions, while hemp companies contend with varied CBD/hemp regulations.

Sales Tax Considerations

Licensing arrangements may create sales tax obligations or require exemption certificate documentation. Hemp brands selling directly to consumers are typically subject to standard sales tax rules in each state.

Risk Mitigation

• Conduct nexus analysis regularly across all jurisdictions where products are sold.

• File returns in nexus states even if no tax is due.

• Document exemptions and monitor legislative changes.

Factor in marketing, contractor activity, and promotional events in nexus determinations.

4. Royalty Calculation and Documentation

Common Dispute Areas

Royalty disagreements often arise over:

• Gross versus net sales bases.

• Treatment of COGS, taxes, and regulatory fees.

• Allocation of shared costs (utilities, equipment, marketing).

• Returns, discounts, and promotional allowances.

Industry-Specific Nuances

• Cannabis: Must incorporate jurisdiction-specific excise taxes and licensing fees into formulas.

• Hemp: May face cost allocation issues related to compliance testing and certification.

Best Practices

• Include pro forma royalty calculations in contracts, tested with realistic production and pricing scenarios.

• Obtain written acknowledgment of the agreed methodology.

• Specify all potential chargebacks, shared costs, and allocation rules.

• Maintain separate royalty tracking systems.

• Perform periodic reconciliations between contractual formulas and actual payments to identify discrepancies early — an emerging industry best practice.

• Consider independent accounting reviews to validate partner-reported figures.

• If the manufacturer and the IP company are related parties, contracts should be reviewed in relation to tax transfer pricing rules that require arm’s length and market rate terms.

Position Your Brand for Contract Manufacturing Success

Contract manufacturing can offer compelling growth opportunities for your cannabis or hemp brand. The key to sustainable success lies in disciplined revenue presentation, strong tax positioning, proactive compliance, and robust royalty oversight.

By aligning accounting standards with tax objectives, maintaining transparent investor communications, and reconciling royalties regularly, your company can position itself to expand with confidence while minimizing regulatory and financial risk.

How MGO Can Help

We help cannabis companies across the U.S. to navigate complex accounting and tax challenges — including contract manufacturing arrangements. Whether you’re structuring royalty agreements, managing state tax compliance, or preparing for a potential audit, our dedicated Cannabis practice can help you grow smarter. Reach out to our team today to learn how we can support your goals.

The post 4 Critical Tax and Accounting Considerations for Cannabis and Hemp Contract Manufacturing Arrangements appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Indiana now uses market-based sourcing for services and intangibles, retroactive to 2019—and companies should review apportionment for prior years.  

• Financial institutions must file combined FIT returns that include only entities transacting business in Indiana, and unitary group filings should be reassessed.  

• Amended Indiana returns are required within 180 days of any federal changes, and missing this deadline may leave your returns open to audit risk.  

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If you do business in Indiana — or with customers in Indiana — there’s a big tax update you should know about. The state has officially moved to market-based sourcing for service and intangible income. That means instead of focusing on where you perform the service, Indiana now cares about where your customers receive the benefit. And here’s the kicker: it applies retroactively all the way back to tax years starting January 1, 2019. 

This change, now locked in under 45 IAC 3.1-1-55.5, lays out a tiered framework that walks through where to source revenue — starting with the benefit location, then moving to the customer’s billing address, and if needed, using a reasonable approximation.  

The rule casts a wide net, covering everything from service revenue and intangible licenses to digital goods and even tax credit assignments. But it does carve out a few exceptions—like insurance premiums, GILTI (Section 951A), and repatriated dividends (Section 965). Read more here and here. 

While Indiana leans heavily on the Multistate Tax Commission’s model, there are state-specific twists, especially in areas like construction, publishing, and transportation. So, if you’re operating across state lines, you’ll want to make sure your compliance strategy accounts for those differences. 

Financial Institutions Tax: Clarity on Combined Reporting and NOL Treatment 

In tandem with sourcing updates, the Indiana Department of Revenue has revised Information Bulletin #200 to clarify how the Financial Institutions Tax (FIT) should be applied. These updates strive to reduce confusion around combined reporting and net operating losses (NOLs). 

If your entity is a part of a unitary group, it must file a combined FIT return, but only for members actively transacting business in Indiana. For more information, you can consult the bulletin, as it also outlines how adjustments can be made if the standard calculation doesn’t fairly reflect Indiana-source income. 

It’s important for you to note that for NOLs, Indiana has reaffirmed conformity with federal treatment: no Indiana NOL exists without a federal NOL, even if one could arise from Indiana-only modifications. Your NOLs may be carried forward for 15 years, with no carryback allowed. The bulletin also addresses scenarios involving the discharge of indebtedness. 

Another important update: your amended Indiana returns are required within 180 days of a federal return change (audit, amended return, etc). If you fail to comply, you leave your return open to state audit indefinitely. 

What This Means for You, the Taxpayer 

Indiana’s adoption of market-based sourcing, especially with retroactive effect, could significantly impact your multistate businesses with service or intangible income. If your company previously applied cost-of-performance methods, you should evaluate whether prior filings require adjustments. 

Financial institutions should confirm that only Indiana-transacting entities are included in FIT combined returns and revisit how NOLs are calculated and carried forward under the revised guidance. 

With the new 180-day amended return rule, you’ll want your tax department to review its federal change reporting processes to avoid inadvertently triggering an open audit window. 

Your Next Steps 

These changes go back to 2019, so they could affect both your compliance obligations and potential refund opportunities. You should evaluate your business’s prior filings, update sourcing methodologies, and consider participating in Indiana’s newly approved tax amnesty program (HB 1001), which may offer you limited relief for pre-2023 exposures. Program details are forthcoming. 

For companies generating service revenue, licensing IP, or filing under Indiana’s FIT rules, these changes are not just procedural for you; they could have real strategic implications. Taking initial action can help you mitigate risk and position your company for better compliance moving forward.  

Practical Support for Navigating Indiana’s Tax Rule Changes 

Maneuvering Indiana’s new market-based sourcing rules and the revised Financial Institutions Tax framework requires more than just a surface-level understanding. It calls for strategic insight — and tailored execution. MGO’s State and Local Tax (SALT) professionals are here to help you assess the impact these changes can have on your business, identify potential refund opportunities, and realign your compliance strategy.

These regulatory shifts may affect businesses across a range of industries, including manufacturing, technology, cannabis, life sciences, entertainment, and wineries. MGO collaborates with companies in these sectors to evaluate tax positions, assess risks or potential overpayments, and refine state tax strategies that reflect current rules and industry practices. Contact us to learn more about moving forward with clarity, confidence, and compliance.  

The post Indiana Amends Income Sourcing and Financial Institutions Tax Rules  appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• With the early rush for market presence behind us, today’s M&A landscape is driven by strategy — whether that means developing in-house capabilities, acquiring complementary operations, or forming partnerships to scale. 

• Building a vertical operation offers control but requires major capital investment. Buying or partnering can provide quicker access to new markets, product categories, or operational strengths. 

• Most companies are blending approaches — building where they have strength, acquiring where they see opportunity, and partnering where agility or cost efficiency is key. The right mix depends on your goals, resources, and long-term vision. 

— 

As the cannabis industry continues to mature, the era of rapid expansion has passed. Today’s deals are more strategic — often designed to strengthen your position in a key state, fill operational gaps, expand into new product categories, or accelerate growth through vertical integration. Whether you’re aiming to deepen your capabilities or reach new markets, one key question remains: Should you build, buy, or partner? 

Build: Owning the Supply Chain from Seed to Sale 

If you’re looking to control every part of your operation — from cultivation and manufacturing to distribution and retail — building a vertical model may be your goal. Multi-state operators (MSOs) like Green Thumb Industries and Trulieve, as well as many single-state operators (SSOs), have leaned into this approach. By developing capabilities in-house, they’ve been able to reduce reliance on third parties, improve margins, and exert more control over quality and branding. 

But vertical integration isn’t simple. Building requires significant capital investment, broadened regulatory compliance, and expanded management teams with the necessary skills, knowledge and experience. If you’re considering this path, ask yourself: Do you have the time, capital, and team to make it work? If not, you may want to consider a faster route — buying or partnering. 

Buy: Acquiring the Missing Pieces of Your Business  

Buying is a powerful way to expand your reach or capabilities — especially when speed and scale matter. Acquisitions can help you enter a new market, acquire valuable IP, or achieve vertical integration. Companies like Tilray and Village Farms have used acquisitions to diversify their operations and enter new verticals. 

If you’re a retailer lacking cultivation, buying a grow operation might make strategic sense. But be aware: buying your way into vertical integration can also mean inheriting the very challenges — capital demands, regulatory complexity, operational risk — that come with building it from the ground up. You’ll need to understand your financial limitations, build accurate valuation models, and ensure any acquisition aligns with your long-term strategy. 

Start by defining what you’re missing. Are you looking to own more of your supply chain? Break into a new product category? Cement your presence in a strategic state? Once those drivers are clear, begin identifying targets that align with your goals — and run the numbers to see if the deal will create the value you need. 

Partner: Team Up to Accelerate Growth 

If you don’t have the bandwidth or resources to build or buy, strategic partnerships can fill the gap. Brands like Belushi’s Farm, Death Row Cannabis, and Cann have leaned into licensing, co-packing, and distribution partnerships to scale without the burden of full operations. 

Partnerships are also a powerful tool for entering new and complex markets. Take Oregon-based brand Alibi, for example. Rather than starting from scratch in New York, the company is cultivating its presence by partnering with licensed producers and retailers to bring its products to market. It’s a flexible and capital-efficient way to gain traction in highly regulated states. 

Partnering lets you tap into another company’s strengths — whether it’s their facilities or local market knowledge — while focusing on your brand and growth. It’s often the fastest and most flexible route to expansion. But it still requires careful due diligence. Make sure any partnership aligns with your business model, protects your brand, and has clear financial and operational terms. 

How to Choose the Best Option for You 

Whether you’re building vertically, acquiring brands, or forming partnerships, your growth moves should be guided by strategy — not just opportunity.  With continued margin pressure, tightening capital markets, and increased competition, managing capital and maximizing return on your resources is essential. 

Start with these three key questions: 

1. What are you trying to achieve? Is your goal to increase revenue, reduce overhead, enter a new market, or gain control over your supply chain? 

2. What’s your financial reality? Can you realistically build or buy? Or would a low-capital partnership be more sustainable right now? Understanding your limitations early can save you from costly missteps later. 

3. What targets align with your capacity? Whether you’re evaluating retail locations, beverage brands, or co-packing partners, a deal only makes sense if it supports your long-term goals — and you have the infrastructure to support it. 

Your choice between building, buying, or partnering should reflect not just current market conditions, but your vision for where the industry — and your company — are headed. 

How MGO Can Help 

Whether you’re exploring a strategic acquisition or evaluating a potential partnership, our dedicated Cannabis practice is here to support you. We offer tailored M&A consulting services — including due diligence, valuation, technical accounting, and integration support — to help you navigate complex decisions with confidence.  

Let’s talk about how we can help you move forward with clarity and strategy. 

The post Cannabis M&A: Build, Buy, or Partner? appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Strengthen your cannabis business by implementing solid financial controls, accurate reporting, and professional oversight to support long-term growth and investor confidence. 

• Develop proactive tax strategies to navigate 280E and state tax burdens while maintaining full compliance and protecting cash flow. 

• Approach financing and diversification strategically to reduce risk, preserve flexibility, and stay competitive in a fast-changing industry. 

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Financial resilience, simply defined, is the ability to withstand and recover from unexpected events and financial shocks. Financial resilience applies to individuals, governments and municipalities, not-for-profit organizations, churches, and many other organizations.  

Overall, cannabis businesses build financial resiliency much like any other business — by identifying risks and implementing strategies to manage financial uncertainty. These strategies include:  

• Strong governance 

• Focus on cash flow and capital structuring management  

• Diversification and performance reporting and monitoring  

However, operating in the cannabis industry means operating in an environment that requires focusing these strategies on challenges that are unique from most industries. A few of the many challenges cannabis businesses experience include: 

• Unique tax burdens: Federal disallowance of certain business deductions (i.e., IRC 280E) and state and local tax (SALT) 

• Fragmented and dynamic regulatory environment: Rules, compliance requirements, and regulations that vary from state-to-state 

• Regularly shifting marketplace: Competition from new operators, impact of non-regulated hemp-derived products, etc. 

With these challenges in mind, here are some practical insights on building a financially resilient cannabis operation: 

Implement Strong Financial Controls and Management 

Perhaps the most critical factor observed in resilient cannabis businesses is financial control and management. The companies that weather industry storms typically share these characteristics: 

• Well-developed business and marketing plans 

• Strong internal controls throughout the organization 

• Sound accounting practices and reliable financial statements  

• Professional financial management and oversight 

When you implement proper controls and focus on reliable financial statements, it improves company value and operational efficiency and provides clearer decision-making insights. This becomes especially important if you’re considering bringing on investors or planning an eventual exit. Buyers and investors will pay a premium for operations with transparent, reliable financial controls and reporting relative to businesses without them.  

The focus on financial controls and management also facilitates internal operational predictability, which improves the ability of management to effectively pivot resources when confronted with unexpected events. 

Navigate Tax Burdens Effectively 

Tax compliance in the cannabis industry crosses into state and local tax (SALT) — such as sales and use tax, manufacturers’ equipment tax, special property tax, and others. But the most prominent tax burden of cannabis operators is federal tax on income.  

Under federal law, businesses operating in the cannabis industry are considered illegal. In 1982, the federal government implemented Internal Revenue Code Section 280E, which, in basic terms, disallowed cannabis operators from taking certain business deductions when reporting taxable income. 

Unless federal tax laws change, IRC 280E will continue to impose an added burden on cannabis businesses resulting from the disallowance of certain business deductions.  

It is common for operators in the cannabis industry to strategically model their projections in anticipation of cannabis businesses being removed from the rules of IRC 280E. But, so far, the short history of the industry has shown us that a rush by the federal government to remove the impacts of IRC 280E is not a priority. Therefore, building a business model around the hope of repeal may be better redirected to focus on proactive strategies that help mitigate its impact while maintaining compliance. 

Partner with cannabis industry-specific tax professionals to: 

• Determine an appropriate allocation of costs between deductible and non-deductible activities 

• Optimize your entity structure to enhance allowable deductions 

• Confirm ongoing compliance while managing overall tax liability 

• Monitor and adapt to evolving state tax laws that may impact profitability and cash flow 

Effective tax planning is a core component of financial resilience in cannabis. If taking uncertain tax positions to mitigate 280E, consider a fund for potential IRS changes coming from a tax audit. 

Be Strategic About Debt and Financing 

Access to capital remains one of the bigger challenges in cannabis. Traditional bank financing is largely unavailable due to the federal status of cannabis, so operators often turn to private lenders, sale-leaseback arrangements, or equity financing. However, each of these options carries trade-offs. 

The cost of capital in the cannabis industry remains high compared to most industries. Whether you’re looking at debt or equity financing, the terms you accept today will shape your business for years to come. 

When considering financing: 

• Be conservative in your projections 

• Carefully evaluate the cost of capital and structure to preserve cash flow 

• Avoid over-leveraging — excessive debt can compromise operational flexibility 

• Align financing terms with the company’s short, medium, and long-term strategic goals 

• Understand how different forms of capital affect valuation and control 

• Don’t base your financial models on regulatory changes that may never come 

Operators who approach financing with discipline and foresight are better equipped to weather market shifts and capitalize on growth opportunities. 

Diversify to Weather Market Shifts 

One of the clearest paths to financial resilience in cannabis is diversification. Relying too heavily on a single revenue stream, product type, or market leaves you vulnerable to changes in regulation, market saturation, or consumer demand. 

Consider diversifying across: 

• Revenue streams: Add branded merchandise, infused products, or service offerings 

• Product mix: Expand into different formats or categories (e.g., beverages, edibles, concentrates) 

• Supply chains: Avoid bottlenecks or disruptions by developing alternate vendors and partners 

• Customer base: Target medical, adult-use, and niche demographics to balance demand 

• Geography: Explore brand licensing in emerging states to expand your footprint without stretching operations 

• Distribution partners: Broaden your network to increase visibility and reduce reliance on any one channel 

Just as important: prepare for frequent regulatory changes and market shifts. States around you may legalize faster than expected. Your region may flood with new competitors. Build flexibility into your model so you can pivot when the environment shifts. 

Operators in mature markets have learned this firsthand. Diversifying into newer markets or adding new product lines can help offset declining margins and regulatory fatigue at home. 

Gain Stability in the Face of Uncertainty 

Financial resilience isn’t just about surviving the next regulatory change or market dip — it’s about building a business that can thrive in a constantly shifting environment. The cannabis industry is marked by rapid change: state-by-state legalization, volatile pricing, and restricted access to capital. Resilient businesses are the ones that anticipate these shifts, diversify thoughtfully, and build strong financial systems that can adapt. 

Whether you’re optimizing tax strategies, strengthening cash flow, or expanding into new markets, each step you take now builds a stronger foundation for whatever comes next. And while cannabis businesses often face added complexities — such as real estate decisions or partnership structures — those risks can be managed with careful planning and professional guidance. 

With the right strategies, you can gain stability in the face of uncertainty. That’s the core of financial resilience. 

How MGO Can Help 

Our dedicated Cannabis practice is here to help your business become more resilient — from getting your financial statements audit-ready and strengthening internal controls to implementing 280E mitigation strategies and managing complex sales and excise tax obligations. Whether you’re expanding into new markets or tightening operations at home, we’ll work with you to build a solid financial foundation. 

Reach out to our team today to start building a stronger, more resilient future for your cannabis business. 

The post How to Make Your Cannabis Business Financially Resilient  appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Outsourced accounting provides real-time financial data and insights to support agile FP&A. 

• Engaging an experienced CAS team enhances collaboration and reduces operational strain on internal finance. 

• Scalable accounting support helps organizations shift from reactive reporting to strategic forecasting. 

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Financial planning and analysis (FP&A) are the cornerstone of effective decision-making — but many growing businesses struggle to give it the attention it deserves. Internal teams are often stretched thin, focused on month-end closes, reconciliations, and reporting cycles. 

Outsourced accounting services can provide a practical path forward for organizations facing growing financial complexity. By transferring day-to-day accounting responsibilities to a dedicated external team, internal finance leaders can refocus their efforts on analysis, forecasting, and long-term planning. This article explores how leveraging Client Accounting Solutions (CAS) can strengthen your FP&A capabilities and position your business for more informed, agile decision-making. 

The Challenge: Limited Capacity, Fragmented Tools 

As businesses scale, so does financial complexity. Many organizations have reached a point where spreadsheets, disconnected systems, and lean internal teams can no longer keep up. Finance teams become consumed by data reconciliation and compliance tasks, leaving little room for long-term planning or scenario modeling. 

Common pain points include: 

• Data overload: Managing high volumes of financial data across spreadsheets and legacy systems leads to inefficiencies. 

• Reactive reporting: Most time is spent looking backward, not forward — limiting the value FP&A can provide. 

• Talent constraints: Hiring and keeping skilled finance professionals is costly and time-consuming. 

• Limited collaboration: When finance is siloed from operations, strategic alignment suffers. 

How Outsourced Accounting Helps Your FP&A Function 

Engaging with an outsourced accounting team provides immediate access to experienced finance professionals, set up processes, and enabling technologies—without the need to expand your internal headcount. 

Here’s how outsourced accounting supports stronger FP&A: 

1. Improved Data Accuracy and Availability 

An outsourced CAS team provides prompt, clean, and consistent financial data — the foundation of any successful planning process. With better data hygiene, your team can focus on analysis rather than troubleshooting. 

2. Enhanced Forecasting and Strategic Insight 

Outsourced accounting support frees up bandwidth for your internal team to work on forward-looking initiatives. You gain access to advisory professionals who can help build models, test scenarios, and align financial planning with business goals. 

3. Built-In Scalability 

As your business grows or changes direction, your outsourced team can flex with your needs — whether that means supporting a new product launch, managing M&A activity, or helping integrate new systems. 

4. Better Collaboration Across Departments 

An outsourced accounting team can serve as a crucial point of coordination, helping align finance with operations, sales, and HR. With consistent reporting and integrated planning processes, stakeholders across departments gain access to prompt information that supports informed decision-making. 

What to Look for in an Outsourced Accounting Team 

If your organization is exploring outsourced accounting to strengthen FP&A, consider these key factors to align support with your strategic goals: 

1. Industry-Specific Experience 
Look for a team with a solid understanding of the financial, operational, and regulatory considerations in your industry—whether that’s cannabis, life sciences, manufacturing, or technology. Sector knowledge allows for more relevant, tailored guidance. 

2. Strategic Advisory Capabilities 
Outsourcing should go beyond transactional work. Seek ability in budgeting, forecasting, and cash flow management, so your accounting function contributes to business planning and performance. 

3. Technology Alignment and Integration 
Even with a services-first approach, technology remains a critical part. An experienced outsourced team should work well with your ERP and support financial planning tools that streamline data and reporting. 

4. Scalable and Flexible Support 
As your business grows or shifts, accounting needs may change. A flexible CAS team can offer controller-level insights, full FP&A support, or project-based services based on your evolving priorities. 

Building a Strategic Finance Function with MGO 

Outsourced accounting is more than a back-office solution. When structured properly, it becomes a strategic lever that supports high-quality financial planning, improves agility, and positions your business for long-term success. 

MGO works with middle-market organizations across technology, cannabis, healthcare, life sciences, and manufacturing to modernize finance operations. Our Client Accounting Solutions, technical accounting advisory, and management consulting services are designed to help growing companies build finance functions that support strategy — not just compliance. 

Whether you’re preparing for an audit, scaling operations, or strengthening your forecasting capabilities, we help you gain the confidence and clarity to plan effectively. 

The post How Outsourced Accounting Can Strengthen Your FP&A Strategy appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Prepare for a cannabis tax audit by retaining 10 years of thorough financial records, using GAAP-compliant accounting methods, and staying current on all federal tax obligations.

• Work with experienced cannabis accountants to document tax positions, accurately track COGS, and respond quickly to any IRS audit notice.

• If faced with unfavorable audit results, consider appealing through the IRS Independent Office of Appeals or, if necessary, pursuing Tax Court.

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As a cannabis business owner, you operate in one of the most heavily scrutinized industries in America. With Section 280E hanging over all plant-touching activities and limiting business deductions, you’re already carrying a heavy tax burden. So adding a potential audit to the mix, it’s understandable why tax compliance might keep you up at night.

But here’s the good news: with proper preparation, you can significantly reduce both your audit risk and potential negative outcomes — and with professional support you may even be able to negotiate a reduction or amendment. Let’s walk through a comprehensive strategy to help you prepare for and survive during an IRS examination.

Your Four-Step Cannabis Audit Preparation Plan

Taking proactive steps now can save you significant headaches (and money) later. Here’s how to get your cannabis business audit-ready:

1. Retain Proper Documentation (For At Least 10 Years)

The foundation of audit defense is comprehensive documentation. In the event of an audit, you’ll need to provide evidence of every transaction under IRS review. These documents must be organized so they can be quickly retrieved and linked to general ledger entries.

Essential documents to preserve:

• Financial statements (trial balance, profit and loss, balance sheet, chart of accounts, etc.)
• Point of sale transaction data
• Invoices, receipts, and purchase orders
• Credit card statements
• Agreements (intercompany, licensing, management, etc.)
• Cash logs (especially important!)
• Payroll documentation and independent contractor agreements
• Rent payments, property tax bills, utilities bills, and other overhead documentation

Since the IRS can leverage an extended statute of limitations when income tax is “substantially understated”, you should save most documents for 10 years and critical formation documents indefinitely.

2. Establish Proper Accounting Methods

Your accounting and record-keeping should align with generally accepted accounting principles (GAAP) guidelines, particularly for inventory accounting — the key to managing 280E exposure.

Critical accounting practices:

• Accrual method of accounting: As a business that uses inventory accounting and reports cost of goods sold (COGS) expenses, you’re generally required to use accrual accounting. This means assigning values to inventory items based on acquisition and development costs.
• Understanding COGS: Your COGS must reflect actual costs of goods sold — not merely renamed ordinary expense deductions. Identify each expense and correctly categorize it as direct or indirect. When allocating selling, general and administrative (SG&A) expenses, they should specifically tie to production costs (not just be a generic percentage of overhead).
• Straight-line depreciation: Recent IRS cases and guidance establish that only straight-line depreciation methods (used for book purposes) are allowable for inclusion in COGS. Bonus depreciation and modified accelerated cost recovery system (MACRS) are not authorized.

3. Stay in Compliance with Federal Tax Law

This may seem obvious, but it bears repeating: the best way to stay off the IRS radar is to pay your taxes. Not paying is the reddest flag of all.

With limited access to banking services and capital, some cannabis operators are tempted to treat delinquent tax payments as a financing tool. While it may seem attractive for cash flow, it dramatically increases your audit risk.

This applies doubly for federal employment taxes (withholding, FICA, etc.), where penalties and interest are severe. The IRS imposes the Trust Fund Recovery Penalty against “responsible persons” in their individual capacity, at 100% of the underlying tax liability.

Remember, cannabis companies are not eligible for bankruptcy protection. If your business is structured as a pass-through entity (LLC or S-corporation), tax debts become your personal liability.

4. Proactively Document Accounting Policies and Tax Positions

If there’s any confusion about accounting practices or you lack back-office support, hire an experienced cannabis accountant to:

• Perform a 280E/COGS study to identify appropriate tax treatment
• Determine whether your “separate trade or business” truly qualifies as separate
• Address outstanding tax balances with an installment agreement or “offer in compromise”
• Review document creation/retention policies
• Ensure inventory accounting procedures align with GAAP/International Financial Reporting Standards (IFRS) rules

Receiving an IRS Audit Notice: Your Action Plan

If you receive an audit notice, don’t panic. Follow these steps:

1. Understand the Situation

The IRS conducts several types of audits — from relatively simple correspondence audits to intensive field audits where they visit your facility. Note that the IRS will first contact you via traditional mail (never by phone or email).

2. Act Immediately

Initial IRS contact letters typically require a response within 10-30 days. Don’t procrastinate. Reach out to a cannabis-specialized accountant immediately and execute a power of attorney so that your representative can contact the IRS auditor within the required timeframe.

3. Work With Qualified Professionals

An experienced representative will know cannabis accounting inside and out, have experience navigating audits, and may even have connections at the IRS. They’ll help minimize risk and potentially negotiate a reasonable outcome.

4. Set the Right Tone

From the outset, build rapport and credibility with the IRS auditor. Organize document production, establish a reasonable timeline, and follow through on commitments.

5. Be Transparent About Known Issues

The IRS examiner is trained to identify errors and problems. If you know there’s a glaring error in your tax return or a gap in record-keeping, consider presenting it upfront. Reluctance may be perceived as fraudulent intent, whereas transparency might earn goodwill from the auditor.

Challenging Unfavorable Audit Results: Your Options

If your audit doesn’t result in a manageable outcome, you have options:

1. Appeal

The IRS Independent Office of Appeals offers a path to resolving disputes without litigation. To successfully navigate this process, you’ll need to clearly present your case, provide all supporting documentation, and demonstrate where the IRS assessment went wrong.

2. Tax Court

As a last resort, you can take your case to U.S. Tax Court. While there have been some successes (Harborside reduced their tax bill from $29 million to $11 million), note that every attempt to overturn 280E has failed in Tax Court. Consider whether potential savings justify the resources invested in litigation.

Beyond the IRS: State and Local Tax Risks

Don’t forget that maintaining compliance with state and local tax laws is equally important. State and local regulators issue your licenses and are directly connected to tax enforcement. Even a minor tax infraction at the local level could lead to license revocation.

Types of audits to keep in mind:

• State income tax
• State sales and use tax
• State excise tax
• Local business tax

Take Control of Your Cannabis Tax Strategy Today

Being “audit-ready” not only helps you navigate an IRS examination but also implements financial best practices that benefit your business in numerous ways — from regulatory compliance to preparing for potential acquisition or initial public offering (IPO).

The cannabis industry presents tremendous opportunities for entrepreneurs ready to forge new paths. But significant risks await the unprepared. By following these guidelines, you’ll be positioned not just to survive an audit, but to thrive in this challenging regulatory environment.

How MGO Can Help

Our dedicated cannabis accounting, audit, tax, and consulting practice help organizations of all sizes — from multi-state operators to pre-revenue startups — establish optimal accounting processes, manage tax and regulatory compliance, perform audits to raise capital or engage in M&A, and everything else an operator needs to succeed.

We also offer tax advocacy and resolution services — including pre-audit readiness, audit representation, and guidance on obtaining penalty abatements and negotiating installment agreements.

Reach out to our Cannabis team today to find out how we can help support your business.

The post How to Prepare Your Cannabis Business for a Tax Audit appeared first on MGO CPA | Tax, Audit, and Consulting Services.

Key Takeaways: 

• The U.S. Northeast is emerging as a significant cannabis market — with evolving regulations and rising consumer demand creating a strong business environment. 

• Newer states to legalize adult use like Maryland, New Jersey, and New York are driving growth, generating billions in sales and positioning themselves as key markets for cannabis expansion. 

• Cannabis tax revenues are helping these states manage budgets, support social equity programs, and fuel economic development. 

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With mature cannabis markets in states like California, Colorado, and Oregon remaining competitive, many cannabis companies are shifting their focus to emerging markets for growth opportunities. The Northeast, in particular, is proving to be a hotbed of opportunity — with new and expanding cannabis programs driving both business growth and significant state revenue. 

Why the Northeast?  

While Massachusetts retains the crown for cannabis sales in the Northeast, states like Maryland, New Jersey, New York, and even medical-only Pennsylvania are emerging as major players. These states offer high consumer demand, evolving regulations, and revenue potential that make them attractive for businesses looking to expand. Here’s how these markets are shaping up and what they mean for your business. 

Maryland: Rapid Growth in Just One Year 

Maryland’s cannabis market took off quickly following adult-use legalization in July 2023. Within its first 12 months, total retail sales exceeded $1.1 billion — with adult-use sales alone accounting for over $700 million. Monthly sales have consistently surpassed $95 million, reflecting strong consumer demand. 

Maryland has used cannabis tax revenue to invest in social equity initiatives. Over $40 million in licensing fees has been directed to the Community Reinvestment and Repair Fund, supporting local jurisdictions and communities impacted by previous cannabis criminalization. And fiscal year tax revenues are expected to top $100 million. For cannabis operators, Maryland presents a dynamic market with significant revenue potential and strong state support. 

New Jersey: A Billion-Dollar Market (and Growing)  

New Jersey’s cannabis market is booming, surpassing $1 billion in combined medicinal and recreational cannabis sales in 2024 — a nearly 25% increase from the previous year’s total of $800 million. Since adult-use cannabis sales began in April 2022, the state has generated over $2 billion in total revenue.  

For the state, the tax revenue impact is substantial. New Jersey has collected over $62 million in cannabis tax revenue since 2022 — along with over $6 million in social equity excise fees that go toward education, economic development, and social services for communities disproportionately affected by cannabis prohibition. For cannabis companies, this signals a stable and profitable market with room for expansion. 

New York: A Complex Market with High Potential 

New York’s cannabis industry surpassed $1 billion in retail sales in 2024 as the state works to establish itself as a national leader. More than half of all licenses have been awarded to social and economic equity applicants, promoting opportunities for minority- and women-owned businesses. With over 275 licensed dispensaries and 500 supply-side licenses issued, the legal market continues to grow — though challenges remain. 

Despite strong consumer demand, New York’s cannabis rollout has been slow and the illicit market continues to thrive. Additionally, licensed medical marijuana organizations face a steep $5 million fee to enter the adult-use market, creating a significant barrier to expansion. While the state is taking steps to strengthen enforcement and improve market conditions, businesses must carefully navigate these regulatory hurdles to succeed. 

Pennsylvania: A Sleeping Giant  

Despite being a medical-only state, Pennsylvania ranks as the sixth-largest cannabis retail market in the U.S. Monthly medical cannabis sales eclipsed $140 million in October 2024, with total sales for the year estimated at $1.7 billion. Since 2020, the state has generated over $6.7 billion in cannabis sales.  

While Pennsylvania has not yet legalized adult-use cannabis, momentum is building. Governor Josh Shapiro has expressed support for legalization to help address the state’s budget deficit. However, with a divided legislature and the state not allowing citizen-initiated ballot measures, the path forward remains uncertain. Still, Pennsylvania’s large population and established medical market make it a prime candidate for future adult-use expansion — one that cannabis companies should watch closely. 

What This Means for Your Cannabis Business 

The Northeast presents lucrative opportunities for cannabis companies across the supply chain. Here’s why your business should take note: 

• Expanding markets: Maryland, New Jersey, and New York are demonstrating strong year-over-year growth, and Pennsylvania could be next in line for adult-use legalization. 

• Revenue potential: With billions in sales and rising tax revenues, these states offer fertile ground for cultivators, manufacturers, retailers, and ancillary businesses. 

• Regulatory evolution: States are refining their programs, creating clearer pathways for business entry and long-term sustainability. 

How MGO Can Help 

Navigating new and emerging markets requires strategic planning, regulatory compliance, and financial knowledge. Our dedicated Cannabis team provides tax planning, audit support, and consulting solutions tailored to the cannabis, hemp, and CBD companies. Whether you’re a cultivator, retailer, distributor, manufacturer, or ancillary business, we can help you make informed decisions to thrive in legal markets across the U.S.  

Looking to expand your cannabis business into new markets? Let’s talk.

The post Northeast Cannabis Market Insights appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Managing finances in the cannabis industry is complex — with strict regulations, evolving tax laws, and banking challenges.

• Outsourcing your accounting function can help you navigate compliance, manage cash flow, and streamline operations.

• Benefits include cost savings, access to advanced knowledge, and improved financial reporting.

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As a professional in the cannabis or hemp industry, you’re navigating an evolving landscape filled with regulatory hurdles, cash flow challenges, and tax complexities. Whether you’re managing a cultivator, manufacturer, distributor, or dispensary, staying on top of compliance while scaling your business can be overwhelming.

Outsourcing your accounting offers a powerful solution — giving you access to extensive experience, strengthening internal controls, and allowing you to focus on strategic growth. But how do you know if it’s the right move for your business?

What Is Outsourced Accounting?

Outsourced accounting can have several meanings including: 

• Fractional or temporary controller 

• Special project accounting manager 

• Fractional CFO 

• Bookkeeper 

5 Reasons to Outsource Your Cannabis Accounting

Here are key signs that outsourced accounting could be the best next step for your cannabis company:

1. You’re Struggling with Tax Compliance and Complexities

Cannabis taxation is complicated, especially with IRS Code Section 280E limiting deductions. State and local tax requirements vary widely, and tracking inventory properly for cost accounting is crucial. If you’re spending more time deciphering tax laws than managing your business, it may be time to bring in consulting professionals who are knowledgeable in cannabis financial regulations.

2. Cash Flow Is a Constant Challenge

Managing cash flow, accounts payable, and payroll efficiently is critical to keeping operations running smoothly. An outsourced accounting team can implement financial controls, improve cash management, and help you meet payroll and tax obligations without stress.

3. Your Financial Records Need to Be Organized and Audit-Ready

Accurate financial reporting is essential for regulatory compliance, securing funding, and long-term success. If your accounting team is overwhelmed with day-to-day tasks and struggling to produce clear financial statements, an outsourced team can bring structure, accuracy, and transparency to your records — helping you stay compliant and prepared for audits or sophisticated investors.

4. You Have to Scale Quickly

As the cannabis industry grows, so do the demands on your financial operations. Whether you’re expanding into new markets, acquiring licenses, or preparing for investment opportunities, your accounting needs may fluctuate. Outsourced accounting provides the flexibility to scale up or down without the costs of hiring and training an in-house team.

5. You’re Concerned About Security and Fraud Risks

If your accounting team is small or handling the majority of the accounting duties, the risk of financial mismanagement or fraud increases. Outsourcing adds an extra layer of oversight — implementing stronger internal controls and reducing the risk of errors or financial misconduct.

How Outsourcing Can Benefit Your Cannabis Business

Here are some key benefits of outsourcing to help your cannabis business grow smoothly and stay compliant:

• Industry-specific experience: Work with professionals who understand the nuances of cannabis taxation, banking restrictions, and regulatory compliance.

• Stronger financial controls: Improve security, reduce fraud risk, and implement better cash management systems.

• Improved reporting and compliance: Maintain audit-ready financials and meet tax and reporting requirements with confidence.

• Scalability: Expand or contract your accounting support as your business evolves.

• Cost and time savings: Avoid the high costs of hiring full-time staff while gaining access to skilled and knowledgeable financial support.

How MGO Can Help

At MGO, we offer tailored outsourced accounting  and advisory solutions for the cannabis industry — providing the right-size support for your organization’s unique needs. Whether you’re looking to support your team with specialized knowledge or skills, manage day-to-day tasks, get assistance with regulatory compliance, or navigate complex transactions like M&A and capital raising, we’ve got you covered.

Reach out to our team today to learn how we can help streamline your accounting operations.

The post Is Outsourced Accounting Right for Your Cannabis Business? appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Some U.S. cannabis companies are expanding internationally to break into new markets and capitalize on global legalization trends.

• Strategic moves by brands like Curaleaf, Tilray, and Khalifa Kush highlight the opportunities — and challenges — of entering foreign markets.

• Success in global expansion requires navigating complex regulations, financial logistics, and cultural differences to build a competitive international presence.

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The international cannabis market is heating up, and U.S. companies are taking notice. With legalization gaining traction worldwide and demand surging for high-quality products, many cannabis brands are stepping beyond domestic borders to tap into new markets.

U.S. Cannabis Companies Going Global

Several U.S.-based cannabis companies have recently ventured into international markets. Some examples include:

Curaleaf

Over the past year, Curaleaf International has made several strategic moves to strengthen its global presence. In April 2024, the company closed its acquisition of Northern Green Canada, a vertically integrated cannabis producer with an EU-GMP certification, enhancing Curaleaf’s reach in established European markets like Germany, Poland, and the United Kingdom. Earlier in 2024, Curaleaf expanded into the Czech Republic through a supply agreement with Astrasana Pharma and acquired Can4Med, a pharmaceutical wholesaler in Poland, solidifying its position in one of Europe’s largest medical cannabis markets.

Tilray

Tilray has been aggressively expanding its footprint across Europe. In January 2025, Tilray Medical secured a contract to supply Luxembourg with high-quality cannabis, reinforcing its credibility as a trusted supplier across the European medical market. In November 2024, Tilray launched its first commercial medical cannabis flower grown in Germany through its Aphria RX GmbH facility.

Khalifa Kush

The premium cannabis brand founded by multi-platinum selling music artist Wiz Khalifa is making its first international move. In 2025, Khalifa Kush will enter the German medical cannabis market through a strategic multi-year partnership with Berlin-based Sanity Group and its leading medical cannabis brand, avaay Medical. The brand’s exclusive strains will be available in more than 3,000 pharmacies throughout Germany, marking Khalifa Kush as one of the first U.S. cannabis brands to break into the European market.

Key Considerations for Expanding Internationally

If you’re considering taking your cannabis brand global, here are some key factors to keep in mind:

• Compliance with local regulations: Each country has unique and evolving legal frameworks for cultivation, processing, distribution, and retail. Navigating these regulatory landscapes requires working with professionals with local knowledge to avoid costly legal and regulatory setbacks.

• Establishing an international infrastructure: Managing international operations means dealing with different supply chains, labor laws, and banking regulations. Working with professionals who are knowledgeable in cannabis and cross-border operations can help streamline this process and prevent unexpected financial burdens.

• Cultural adaptation: Marketing strategies that work in the U.S. may not translate well abroad. Understanding consumer preferences, branding expectations, and local cannabis consumption habits is critical to success in foreign markets.

• Tax strategy: Structuring your operations to minimize your foreign and domestic tax exposure is critical. Doing so requires working with professionals with a deep understanding of both the cannabis industry and international tax structuring.

• Intellectual property protection: Securing trademarks and patents for your brand and products in foreign markets is crucial to preventing unauthorized use and protecting your competitive advantage.

Is It Time to Take Your Brand Global?

If you’re considering international growth, now is the time to start building the roadmap. With proper planning and strategic partnerships, your cannabis brand can thrive in new markets and gain a competitive edge.

How MGO Can Help

With dedicated Cannabis and International Tax teams, and alliances and partnerships in more than 160 countries, MGO provides the guidance you need as you evaluate and analyze opportunities internationally, navigate local regulatory and tax environments, and seek out trusted in-country partners. Reach out to our team today to learn how we can help support your international expansion.

The post Is It Time To Go Global? Cannabis Continues To Grow Internationally appeared first on MGO CPA | Tax, Audit, and Consulting Services.