Capital Gains and Losses

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I'm in the concept stage of opening a recreational cannabis…

I'm in the concept stage...
I'm in the concept stage of opening a recreational cannabis business in Oregon. The federal gov't does impose the standard income tax but is not allowing write off of expenses because of cannabis being federally illegal. Would my employees be considered direct or regular labor...or does it matter?
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10/15/2017
bkb1956
bkb1956, Enrolled Agent/Real Estate & Corporate Paralegal
Category: Capital Gains and Losses
Satisfied Customers: 6,361
Experience: 20+ years of experience as a tax preparer; 30+ years of experience as a real estate and corporate paralegal
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

The difference between direct labor and indirect labor is that only labor involved in the hands-on production of goods and services is considered to be direct labor. All other labor is, by default, classified as indirect labor. This distinction is important from an accounting perspective, not a tax perspective.

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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Customer reply replied 9 months ago
Ok. I believe I can deduct COGS as a direct cost but nothing else. able to deduct the COGS?

You can deduct COGS.

Please take a moment to rate my answer since that is the only way I receive credit for answering you.

Thank you.

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Customer reply replied 9 months ago
sorry I was cut off. Cannabis is 80% of the of the business so it looks like the only deduction that can be taken is the "illegal" cannabis. So direct labor is not treated like a direct cost for tax purposes?

The following link contains great information regarding this topic:

https://www.californiacannabiscpa.com/blog/marijuana-business-cost-of-goods-sold-cogs-overview

Once you have reviewed it, please let me know if you have any other questions.

bkb1956
bkb1956, Enrolled Agent/Real Estate & Corporate Paralegal
Category: Capital Gains and Losses
Satisfied Customers: 6,361
Experience: 20+ years of experience as a tax preparer; 30+ years of experience as a real estate and corporate paralegal
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bkb1956 and 87 other Capital Gains and Losses Specialists are ready to help you
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