It’s harvest time around our neck of the woods and that means farmers markets. It also means apples – and in my case canning apples for apple sauce and of course to have pie all winter long. One thing you never see any more is an apple cart – unless of course you live in Amish country. The apple cart was used for both transporting the apples to market and for displaying the product for people to purchase. Turning over the apple cart meant to disrupt the flow of your business. So, let’s Turn over the apple cart! The first step is evaluation of the current processes. How willing are you to change your processes so you can get ahead of the competition? Even processes that have been working well for several years can get derailed and what if there is new technology that can make it even better.
I find that the fall is the best time to evaluate how you are doing on accomplishing the goals you set out to do at the beginning of the year and make sure you are still on track. It is also a great time to evaluate your processes, procedures, the software you use, or even the apple cart itself to see what needs attention. In the cannabis industry, there’s another item to evaluate: will this new process, procedure, software or even your apple cart be deductible for 280E compliance?
Let’s start with the apple cart, when it is used to transport your product only (and nothing else), it can be considered a part of cost of goods sold, and is therefore, an eligible expense for 280E compliance. However, when that same cart is used for displaying the product it becomes part of the retail space and then it is no longer an eligible 280E expense. But Hold on – you can split the difference! By using time in service, you could argue that the time spent as a display would not be eligible, but the time spent for transportation would be a viable 280E expense. That is what makes this industry so unique; you must take the time to figure out if this same apple cart is transportation, display or both and then be able to account for its use. So, figure it out and write it down.
Yes, that is what I said – write it down. You must have documentation for every expense explaining why and to what extent an expense or asset is part of cost of goods sold for 280E compliance, and when it is not. That makes thorough documentation the first and foremost thing you need to do. Go through all your processes, procedures and even expense items and document not only what the process or procedure is, but also how it should be reported on your financials – as either a 280E compliant cost of goods item, cost of goods that is not compliant with 280E or something else. Why track the expenses not associated with 280E? Because even if an expense cannot be taken for federal tax purposes it often can be for state purposes. It will affect your bottom line, but only if it has been properly documented.
Now that we have determined if our apple cart can be used as an expense, we now need to evaluate the actual cart itself. First is it still the best and most efficient way to either transport or display our product? We may find that it is still the best display but not necessarily the best for transportation. You should ask yourself, if it is not the best for transportation can it still be used for the display?
Give us a call and we can help you evaluate all of your apple carts and the other procedures, processes you are using to see if they are still up to doing the jobs they were intended to do.