Cannabis is subject to numerous taxes which, in some places, is causing an exodus from the business. California is making an effort to staunch the bleeding. The state is offering the HRCTC to qualified businesses to keep people in the business and stabilize tax revenue. Taxpayers MUST make a tentative credit reservation, and these are given on a first come, first served basis.
The credit is for up to 25% of qualified expenditures (up to a maximum of $250,000). Obviously, this is a substantial break. But there are requirements. The first of which is making a tentative credit reservation. And making this soon is important as there is a limit on the total amount of this credit ($20 million).
To qualify a business must be a commercial cannabis business with a retail or micro-business license. These businesses also must provide full time employees with wages, group health insurance and retirement benefits/pension benefits (including stock options with the employer paying full value of the stock). The taxpayer must be exempt from requirements of the CalSavers Retirement Savings Program.
Expenses that qualify for the credit include wages for full-time employees, safety-related training, equipment and services and workforce development and safety training for employees. Remember that you MUST make a tentative credit reservation, and these are given on a first come, first served basis.
ERC Disruption For Service Companies
As we continue to see happy clients inform us about receiving refund checks, we want to mention some misconceptions about the ERC that may be an opportunity. We are seeing the following opportunities:
Misconception: The lifting or lack of COVID orders in my location means I cannot claim ERC - This is not true. Companies are entitled to the ERC if government orders anywhere in the US cause material disruption to one’s business. Typically, we see supply chain issues caused from vendors delivering late.
Misconception: Disruption from supply chain issues only is eligible if the delay is due to my products being stuck at a port - Not true. Supply chain issues can be caused by both foreign and US vendors delivering late or not at all. Not only were US ports backed up due to covid restrictions, but so were US trucking companies. In our experience almost everyone was affected.
Misconception: Supply chain disruption only applies to companies that sell products. - False. Companies that perform services can also have supply chain issues. Sometimes it’s a law firm that has their court dates delayed due to government shutdowns. Sometimes it’s a broker who doesn’t get paid for her service until the product is received by the customer. Sometimes it’s a real estate agent who has trouble selling houses. Sometimes it’s a laundromat who can’t get the parts to fix the washing machines, or the auto repair shop that can’t get the parts to fix the cars.
