As we all know, if your business is in the cannabis space, you are not allowed credits, exemptions, or regular deductions.

You are, however, allowed to reduce your gross income by Cost of Goods Sold. So during the audit of a cannabis business, the auditor will check to make sure that you didn’t violate 280E by deducting ordinary and necessary expenses, and they will comb through your cost of goods sold transactions to make sure that you didn’t hide any ordinary and necessary expenses inside of cost of goods sold.