To run a Cannabis business in California you need to comply with a number of rules and regulations. There are different government reporting requirements where you will need to disclose about your business. There is a lot of stuff that you need to comply with seriously or else it is you who is going to suffer the most.
Among so many compliances there, another thing is most important and that is California form 8300. Whenever your cannabis business is dealing in cash you need to remember filling this IRS form 8300 within the stipulated time.
Filing Form 8300
It’s not only about California cannabis taxes but according to IRS any business that transacts in cash must report for any cash transactions over an amount of $10,000 from any single identity. Even your cannabis business too needs to file a form within a period of 15 days after the date when you have received cash of $10,000 or more from any individual.
You will need to report under any of the following circumstances
- There is a single transaction totaling $10000 or more than it
- Two or more related payments from a single entity are totaling an amount of $10,000 or more.
- Part Payments received from a single transaction has amounted to more than $10,000 within a period of 12 months.
All this will be applicable when you receive cash payments over a period of 12 months from the same payer. It may be an individual, company or partnership firm.
In this situation, cash should not be considered as only the currency and coins but it includes everything like money orders, cashier’s check, and bank drafts too.
Importance of filing the Form 8300
Apart from the requirement for California cannabis taxes the form 8300 is applicable for any kind of business, be that a shopkeeper or a car dealer. The accounting department needs to track payments from any party and find out when they are crossing the limit of $10,000 over a period of 12 months. Sometimes the payer wants to avoid the reporting of cash transaction over the Form 8300. However, it is the responsibility of the recipient that they fill the form duly and submit within 15 days of crossing the limit of $10,000. A sample IRS form to fill out is located here for reference.
For any cannabis wholesaler, it is not rare that there are parties who are making cash payments and thus it is necessary that when you are dealing with that business you must fill the form on time. When you miss paying the form there are huge penalties that might include 18 months in prison. This penalty is not for not complying with the rule but it is considered that you are helping in drug trafficking by hiding those concerns or people who are transacting over $10,000 in a year.
When you are not filing the California form 8300 you may be accused of bigger offenses and thus it is best to disclose everything and submit the form on time. It’s not only a piece of paper but something that shows how easily you are complying with the IRS rules.
There have been several tax avoidance schemes and some examples you can learn from to avoid jail time, such as “The Situation” from the reality show New Jersey Shores, video covering the jail time is located here: https://www.youtube.com/watch?v=YCUlWzmx_DI
What is considered cash on Form 8300?
Cash is defined in form 8300 as U.S. and foreign coin and currency received in any transaction or a cashier’s check, money order, bank draft, or traveler’s check having a face amount of $10,000 or less that is received in a designated reporting transaction such as those involving cannabis sales for product, goods or services rendered. Especially when the transaction in which the recipient knows that the instrument is being used in an attempt to avoid the reporting of the transaction under certain federal regulations which currently cannabis is considered a scheduled 1 drug and considered federally illegal. There are exceptions as cash does not include a check drawn on the payer’s own account, such as a personal check, regardless of the amount. Other exceptions are using a cashier’s check, money order, bank draft, or traveler’s check is not considered received in a designated reporting transaction if it constitutes the proceeds of a bank loan (or other types of loans) or if it is received as a payment on certain promissory notes, installment sales contracts, or down payment plans.